How to get prequalified - a catch 22

Question

I've hit a catch 22. There is a four plex I'm hoping to have access to and to verify numbers on but the owner has asked all potential buyers be serious buyers who have prequalification. I can't get prequalified because I don't have the down payment. To get the down payment I need a partner but can I get a partner when I can't verify numbers yet? My options so far are as follows:

- partner with a family member who gifts me the down payment while I property manage. How do I make this a secure investment for them since its a gift? I did get some of the 'grey' advice that I can have a private note that isn't reported to the credit bureaus that I happen to forget about when I apply for the loan.

- partner with another investor who supplies the down payment while I do the property management. How do I get them involved when I can't get numbers verified? Just make it part of the deal that I structure it? How do I prove I can do any of that!?!?

AHHh.... I'd love advice!

Steven J. · Answer

Hmm... I might be in an old fashioned market with regards to how things are done. I completely thought pre-approval was no big deal but I did get quite a bit of resistance from people I talked to. Perhaps it is because I did mention my lack of funds... Perhaps I need to look around at other lenders as well. I'm trying to do the FHA owner occupant route to get into a four plex. My biggest problem is not having sufficient funds to cover the down payment and reserve requirements. Apparently, I can't get the reserve funds as a gift I'm told. I'm willing to put together a package that describes how I plan for this to work but I'm also being told that might hurt more than help. Its very confusing. I feel like I'm trying to employ what I'm getting from BP but it doesn't translate to my market well. URG! Thanks for the help guys. At the very least I'll get pre approved by others.

Daren H. · Answer

To get prequalified most lenders are not going to require hard proof of down payment funds. When I first started out I spoke to a lot of lenders and prequalifications were handed out after a 15-20 minute phone conversation just based on what I told them about me. Prequalifications are worthless as others have stated. Just call some other banks and don't volunteer that you don't have the down payment funds. In my case, after I compared the various lender products and fees, I narrowed down my selection and got pre-approved. You should get pre-approved regardless. It would be terrible to get a contract accepted only to find out your lender cannot approve you for the loan even though they prequalified you. Good Luck Sir!

Michael Rinaldi · Answer

Hey Steven J. Interesting dilemma. I think its clear your big problem is not being able to cover the down payment. If you are trying to go the FHA route you need only 3.5% of the purchase price down plus closing costs etc. I can't imagine a bank pre-approving a loan without that down payment at least in your back pocket. If I were you, I'd save up for that down payment and then some so that you can afford to make the purchase and get started on your investing career. Good luck and keep us posted

Account Closed · Answer

As sad as this may sound, the pre-qualification is actually worse less than the ink/toner and paper used to create it. You should be able to get prequalified for a loan from just about any financial institution. Pre-Qualified is one step Pre-Approved is another Getting approved is yet another creature altogether.

Zechariah Evans · Answer

How many lenders have you contacted. I would start by call around and explaining your situation that you need pre-qualification in order to view a possible deal. Also, contact a local investor friendly Realtor they should be your best resource. Hope this helps,

Richard C. · Answer

My credit union hands out prequals, which are pretty meaningless anyway, like candy. Just on the basis of an interview with a loan officer.

Shawn Mcenteer · Answer

Pre qualification just means you are on good terms to be qualified but you will not know till underwriting takes place if you actually qualify or not. I am suggesting to talk to a lender and explain your situation and see if it something they can work around to get the ball moving for you. I am only suggesting this because I have seen individuals get prequalied and the lender come out behind them telling me "I don't think they will get the loan" Not sure if this is a legal or illegal practice, just saying I have seen it happen.

Shawn Mcenteer · Answer

My lender has given out prequalifications