As a real estate investor, you know that there is nothing more frustrating than finding the perfect property only then to have trouble securing the loan that you need. It seems that this business can be a tale of chasing two elusive creatures, firs the perfect property and then the perfect loan. And in most cases, getting the two to line up can feel almost impossible. But having these 14 tips from loan experts in your pocket can help you to be much more confident and successful when you are seeking a loan for that potentially awesome property that you just discovered.
1. Include income history. You will find that lenders want to see that you have stable income. The best proof of that is W2 income.
2. Know your credit score and list it on your request. If your score is not in the excellent range, be sure to add an explanation as to why it is below that top level.
3. Financial transparency is a must. Be sure to include all of your personal financials as well as those for your partners and the company. In addition, include business plan for the project with details on the financials, the timeline and pictures of the property.
4. Clearly show the lender your level of expertise and experience via your past projects. If possible, provide copies of closing docs to verify the numbers and the success of each project.
5. If you own property, offer that as personal collateral to counter-balance any deficiencies in your profile. It is always good to show a lender that you are willing to have skin in the game.
6. As a first time or new real estate investor, be willing to start small. It is easier to get a few small loans and then those completed the projects will help to prove your abilities and experience.
7. Knowing your market will not only help you to select a property that holds a great deal of potential but it will also help you to understand exactly what lenders will offer on the property and why.
8. Asking for money is never an easy task, especially when you are talking to a strange. But you can begin to pave your path to success by investing some time to build relationships with a few potential lenders. In the end, your choice for a lender will be solely based on the final numbers, but having a few options and known resources can make it much easier when you are in a hurry to get a loan and secure a great property. And as you build the relationship, you will find that you are gathering great information and tips from the people who actually know what it takes to get a loan because they are making the decisions.
9. You never want to have an entire deal and all the time that you have invested in it resting on the choice of one lender. Even if you think that your loan application is a slam dunk and you are certain who the lender will be, always have a back-up plan. Applying to more than one lender gives you options in case something unforeseen occurs. Your contact might become ill or get overloaded with tasks and processing times could double. If you don’t have time to wait, then go to your second choice lender. Always have options when it comes to lenders and every step in your processes.
10. As you get to know potential lenders, you will determine what type of property each lender prefers to work with. Always try to match your lender to the type of property you are purchasing. This just keeps life simple and streamlined for everyone involved.
11. Planning is critical not only for the overall success of your investment but also in securing the loan. Lenders want to see details showing all of the expenses, the projected sale price and the expected profit. Having realistic expectations and even a contingency plan makes a great impression on lenders.
12. Invest some time in your presentation packet, including all of your financial information. It could be W2’s, paycheck stubs, bank statements or copies of credit reports, but make them easy to read and in a sensible order. This is a project that you will do once and then reuse each time you apply for a loan. Invest the time to make it as professional and user friendly as possible. If a lender has to search through a pile of random pages, he or she will quickly get annoyed and make a less than favorable decision about your loan request.
13. Demonstrate a sting history of creditworthiness by including documentation for previous projects with on-time payments and completions that hit your projections. Showing a lender is far better than telling them about your history.
14. Surround yourself with a network of real estate professionals who can educate you as well as vouch for your knowledge and skills. Having a strong reputation in the industry will come to light when your lender is gathering information about you.