How to Find the Right Lender for Fix and Flip Loan
How do I choose a lender for a fix and flip loan? How do I decide where to get a fix and flip loan? What qualities make a good lender for fix and flip loans? Many people interested in the flipping business often ask these questions and more. Finding the right lender for a fix and flip loan is more than just securing quick financing. In fact, it‘s half the battle.
Since you‘re likely to seek more fix and flip loans to build your portfolio, it‘s important to find a fix and flip lender that meets your budget and needs. Want to know how you can find the right lender for fix and flip loans?
1. Look at the Lender’s Fees
Fix and flip loan rates and fees are all over the headlines. While this is a great opportunity for flippers to shop for short-term loans, not all lenders offer friendly rates and fees.
Every lender will look at your creditworthiness and other factors, but each will assess you differently. That is why it pays to shop around. So, what you need to look at their fees and rates. If you’ve to pay very high-interest rates, it will easily wipe out your profits from your flipping business.
This is why you need to shop for fees and rates together. So, take your time to compare the rates and fees. Alternatively, you can contact the lender who will provide you with the latest rates and fees. Not only that. The lender may break down the expenses involved.
2. Choose a Credible Lender
How do I know if a lender is reputable? Scam lenders are on the rise fueled by the COVID-19 pandemic and the economic fall-out. Yes, bad lenders have been around for a long time, but today, their tactics have evolved. However, with a keen eye, you can spot scam lenders.
If a new lender is giving you a fix and flip loan, the best way to know its credibility is online. All you need to do is carry out a simple search, and the search engines should generate enough information to get you started. What you should look for are signs of negative news stories and customer reviews.
You can also search the lender‘s name on the Consumer Finance Protection Bureau or Better Business Bureau. This is because legitimate lenders must register with state agencies before giving out loans. We also recommend consulting your state Attorney general’s office. They have repositories of information on the reputation and worthiness of business in your state.
3. Find Out the Loan Amounts Offered
Besides the rates and fees, you should also find out the loan amounts offered. Typically, fix and flip lenders offer anywhere from $50,000 to $5 million. However, some fix and flip lenders may provide a large credit line of up to $10 million. This is usually advanced to experienced flippers who have been in the business for several years.
Depending on your experience and the number of properties you’re planning to flip at the time of borrowing, the lender will determine how much you need. Of course, as you continue flipping homes, you build a portfolio that you can leverage for bigger loan amounts.
4. Compare Repayment Terms
It‘s important to find out the repayment terms offered by a lender. On certain occasions, money may be tight or tied up in your multiple flips. As such, it may be difficult to make interest-only payments on time. Yes, interest-only payments may not affect the principal.
However, the longer it takes you to repay the loan, the bigger the end-of-term payment will be. Lucky for you, lenders are willing to allow you to pay off the loan early without penalizing you. This is a money-saving option that can also boost your credit score.
It‘s also important to compare term lengths. This is because surprise repairs can create unexpected delays. By comparing term lengths, you can learn if extensions are possible. In addition, you can find out if you’ll accrue any penalties. This option can save your flipping business and your potential returns.
Most fix and flip lenders have a fast approval time. In fact, some can approve your loan in 24 hours. However, other lenders may take a few days to approve your fix and flip loan - 7 to 14 days. To find the right lender, find how fast they can approve your loan, their repayment terms, credibility, fees, and rates.