4 Essential Steps on How to Get a Loan to Flip a House
So many people want to know how to get a loan to flip a house. It's a question I get all the time.
Although traditional mortgages are not my preferred way to fund my flips as I prefer to flip houses with no money using private money, you can learn how to get a loan to flip a house using traditional banking.
Some house flipping pros would say that with tightened restrictions on the banking industry, it's nearly impossible to do it this way nowadays.
However, I highly recommend you go the traditional bank loan route first when you are doing your flips.
So due to big demand on how to get a loan to flip a house, enclosed is a guest post from our friend Trenton Fortes from Mortgage Fit on how to get a loan to flip a house using traditional banking. Enjoy!
Traditional or conventional mortgage loans are a tad different from the mortgages that are backed by the government.
Not only are they not backed by the federal government, but also the entire risk factor for the loan remains on the part of the buyer. Taking out a traditional mortgage on a real estate investment is obviously different as compared to taking out a VA or FHA loan. Especially if you're flipping houses, these loans are even more distinctive.
The banks and credit unions also go ahead and issue a traditional mortgage loan with the assumption that if you default, then the risk is all yours. Now, with higher risk involved in a traditional mortgage, you might as well expect to make higher down payments and meet stricter lending requirements as well.
4 Steps to Help You Get a Loan to Flip a House
If you go by historical data, then the very first mortgages that were issued happen to be traditional mortgages itself. It wasn’t until later that the concept of mortgage financing came into vogue for the low-income buyers or those who happen to have special demographic requirements. Arm yourself with paper, pencil and a loan mortgage calculator and get set to do the needful as discussed below.
These four steps below will help you to get a traditional bank loan to flip a house.
1. Have a look at your credit score: Before you do anything further, the very first thing you should do is check out your credit score at the moment. This is essentially because good credit scores are extremely important for the purpose of obtaining bank finances.
You should have a minimum score of 620 if you’re looking to get approved, but the interest rates involved aren’t going to be great. The idea is to try to raise your score from a few months before you actually go ahead and apply for a mortgage loan.
2. Have all your documents in order: It’s rather important that you have all your documents in order. It’s also necessary that you get your income and assets verified if you’re looking to get a traditional mortgage loan. Moreover, you need to be prepared to put down the value of at least 20 percent of the value of the house or pay Private Mortgage Insurance (PMI).
This Private Mortgage Insurance is obviously required by lenders essentially because of the risk of default. Amongst all other documents that you’ll be required to produce include W-2 tax forms, your most recent pay stubs, plus your employment history as well as bank and account statements.
3. Send applications to several places: Once you’ve come to a definite conclusion about mortgage requirements with the help of a loan mortgage calculator, then it’s time you contacted several lenders regarding this.
This is essentially because the terms keep varying across lenders and you might feel that the bank where you conduct your day-to-day transactions isn’t the ideal choice. You should also run a check of the credit unions that are known to offer better rates to their members.
4. Supply extra documents when requested: You’ve got to understand the fact that due to the increasing number of house defaults, lenders are also scrutinizing mortgage requests far more carefully.
For instance, if you’re self-employed you should be prepared to submit copies of your last 2 years’ taxes at least. Massive layoffs have given lenders all the more reason to ensure the fact that you’ve got cash reserves after you’ve bought the home.
How to Get a Loan to Flip a House Conclusion
Keep in mind the above steps when you’re going to take out a traditional mortgage. Make sure you’ve got an approximate estimate with the help of a loan mortgage calculator before you go about doing anything.
As a house flipper, getting a traditional mortgage loan isn’t that difficult provided you do things the right way at the right time.
I would like to start flipping houses, I just moved to the Orlando area and would like to partner up with someone, how do I begin???
Hi Donna – I’m going to have my team member Ryan email you today
Want to start flipping homes but don’t have a lot of money for down payment or I don’t want to put anything down.
You don’t need to use your own money to fund your flip. I rarely use any of my own money to fund my flips.
This manual explains how I secure funding. Check it out when you can https://houseflippingschool.com/secure-the-funding
I am a veteran with no money down eligibility and an over 700 credit score. I am closing soon on my current home and want to use that money to fund rehab on flips. I would like to talk to someone about my game plan. I am in the Tampa area.
Hi Howard – Congratulations on your new home. I don’t think you can use the money you are receiving to rehab your home to use on other homes.
Unless you are talking about a line of credit secured by your home you may be able to utilize it that way. All the best and check out some of our products on the website to assist you.
I am also a veteran planning on starting a real estate empire/flipping houses. I would like to talk to somebody about my plan. I want to utilize my VA Loan and take advantage of the no money down. Thanks for all of your help!
Hi Andrew – Check with your local VA loan officers but most likely you can’t use it for anything other than your own home. You may be able to move into it for a set period of time and then sell but just make sure you ask for how long that applies.
hi mike,, I am ready to start flipping houses but I had my own home mortgage and I don’t know how to get another loan for my 1st flip??
I thought about using hard money but that will charge me a lot and I think if i do that i am going to so the same thing on the 2nd home?
what is your advice,.
Hard money is an option and I realize the rates are high so your option is to use it and make sure you understand the financial aspect of the project. The other option is to borrow money from a bank if you qualify or privately. All the best.
I’m looking into using my credit cards to purchase flips. What is the best way to use them or is it best to purchase rental properties?
Hi Alex – Mike covers credit cards and other funding sources within the Toolkit > https://houseflippingschool.com/tool-kit/
How do I get on list for coaching or school you provide ?!! Thank You
Hi Matt! Happy to hear you are interested in coaching.
Right now I would recommend downloading our Tool Kit which will give you all the information you need to get started > https://houseflippingschool.com/tool-kit/
If you are in the Massachusetts area I would also recommend attending an HFS Meetup where you’ll be able to meet Mike and his team > https://houseflippingschool.com/house-flipping-school-meetups/
The guys are taking a break from their full fledged coaching/consultation programs and services. However we will let you and everyone know when we start up the bootcamps and personal coaching services again.
Trying to get in on flipping houses, but my money is not right or my credit. I am a contractor just need the help on the money end.
We definitely recommend reading and incorporating the mindset described in “Think and Grow Rich” by Napolean Hill > https://www.amazon.com/Think-Grow-Rich-Landmark-Bestseller/dp/1585424331/ref=sr_1_1?ie=UTF8&qid=1472155225&sr=8-1&keywords=think+and+grow+rich
Then when you are ready, we would recommend incorporating our strategies from the Tool Kit > https://houseflippingschool.com/tool-kit/
Do you know of any Hard Money Investors or even private lenders that would be able to work with me in lending me money to flip properties? I have tried several but they either want someone with experience or don’t offer much or I have to pay closing fees and all other kinds of fees. Please email me on personal email: email@example.com
I appreciate any help you can give me. Thank you so much.
HelloTanya – What area are you from and looking to rehab in. I want you think of it like if you were lending your money out. You would be cautious and want to lend to someone with experience. Your job is to educate yourself and find a deal on it own merit and present it to lenders showing the financial gain potential it has. ONe way is to partner with someone who has experience or maybe a contractor who has experience in renovations. If you are local I may be interested in looking at any potential deal in this capacity. No doesn’t mean no. You just have to learn other ways to get it done. These are a few and hope this gets you thinking in another direction. I had these same concerns when I first started so it is normal.
I want to start flipping house how do I get funding? What do I need to do to get started? I live in NW Ga.
Please consider subscribing to our Tool Kit > https://houseflippingschool.com/tool-kit/
The 8 module course within the Tool Kit will answer most questions beginners have.
I am looking at buying a large 1 Bedroom/bath (almost 1,000 sq ft) it is on a large lot for the area. I have plenty of room to add to additional 2 bedrooms and 1 bath. I already know I will be having to demo most of the walls to change the layout but keeping the kitchen in the same area. Do you recommend adding the 2 bedroom and bath in addition to doing the kitchen and other bath or am I biting off a lot. After the purchase amount I only have 150,000. Is this realistic.
SF Bay Area
I inherited a house but I have a house of my own. I would like to flip the inherited house but I don’t have the funds to fix it. I would also like to get into the house flipping business, I am hesitant and afraid to do so because I have no Real Estate background. I need your advise.
Jade – OC, California
Thanks for your comment. It sounds like our new House Flipping Online Course would be perfect for you. Here is a link which explains more – http://www.houseflippingschool.com/education . Let us know what you think or if you have any questions.