There are two main options for fix and flip loans. Conventional or hard money. Though difficult to acquire for many flippers, conventional loans present great opportunity to individuals possessing the right credentials. For conventional lending, first off, high credit scores are needed. The banks want to see who well the borrower has payed his or her debts in the past. Have payments been made on time? Are there any delinquencies? Have there been any foreclosures or repossessions? Essentially, to the banks, credit history indicates the risk of loaning. If there is a favorable credit score GREAT. However, that is not the end of the story. Debt to income is another indicator.
What is debt to income? Debt to income is the total debt figure divided by income. Banks use this ratio to calculate if a potential borrower is able to make payments, especially after adding any requested loans. Max debt-to-income ratio for conventional banks tends to hover between 40%-50%. Thus, borrowers must show favorable debt to income in order to indicate that they can pay off debt with the amount within the constraints of a given income.
Collateral or significant assets to back loans is another indicator conventional lenders look for when loaning out money. It is another crucial factor for receiving a conventional loan. What types of assets, general property or equity in property, does the borrower possess? Is the proposed collateral enough to buffer the lender in the unforeseen event of foreclosure? These are escape plans for the bank. The leveraged assets of a borrower form the shield of lending agencies. Finally, conventional lenders look for a history of profit, repayment, and success as good omens. What is the borrower’s track record? Has the borrower been able to repay previous flipping debts? Will the borrower continue to repay debts and remain a profitable business entity in the future?
If the borrower is able to prove that he or she has a positive record in these areas, it may be likely that he or she can receive a fix and flip loans from a conventional lender. The benefit to receiving conventional money is that the borrower is able to then access some of the most competitive rates available, much lower than that of hard and private money lenders. However, the draw-back to conventional lending is the fact that the funding process takes so long. Conventional lenders take months to fund on average. There are other complications that arise with conventional lenders. Mainly, how does one obtain distressed, short sale, or foreclosed property. This is a challenge because conventional lenders are primarily interested in properties that can be lived in.
If you don’t fall into these categories, or if you would like another source of lending that is quick and can get the job done in a timely fashion, talk to your broker at Level 4 Funding. Level 4 Funding is here to meet your needs regarding fix and flip loans.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.