Wait to get Pre-approved?

Question

Hi, my name is Shawn. First-time post, here!

So, I got my real estate license earlier this year, and now I want to get into real estate investing. Particularly rental properties. I do work full-time and have no debt except for my car payment which I have just under $4,000 remaining to pay off. I obviously don't want to look at properties that I won't be able to get, but should I wait until my car is paid off before I get pre-approved? Or would it not make that much of a difference and I should just go to a lender and see what my buying power is right now so I can at least begin looking? I've been throwing more on the car payment to pay it off quicker, as my goal is to purchase my first rental property next year.

Thanks in advance!

Alexander Felice · Answer

never wait for information.you need to know what the bank is going to think of your situationyou need to know what they will expect to close a dealyou need to start building relationships immediatelywaiting is going to help none of that. Find a few lenders to tell your story and discuss strategy, they will give you advice, perspective, and education.

Antoine Martel · Answer

Shawn.I think you should get in front of some banks and see what you could be pre-approved for. $4,000 isnt a lot of debt. As long as you have the income to support it.

Shawn Wade · Answer

Thank you, @Alexander Felice!

Stephanie P. · Answer

@Shawn WadeShawn,Hi. Welcome to BP.There are a couple issues here. I hope you're doing real estate part time and have a full time W2 job. Otherwise, you won't qualify for anything because of your recent switch to self employed.If your car has less than 10 payments and it's not a lease, it won't factor into your debt ratio, so that issue is resolved. You will need other trade lines though.If the job isn't an issue and you have the other requisite credit, I'd look into buying units using FHA. 3.5% down, you can use part of the lease income as your own as long as you live in the property.Hope that helps clarifyStephanie

Matt K. · Answer

Find a investor friendly broker/loan officer.... and tell them your situation AND your goals. They'll help you get there from a lending point. I ran all kinds of scenarios through mine to fine tune what I wanted...

Shawn Wade · Answer

Hi, @Ben Freiman! Thanks for the welcome! I appreciate you responding and thank you for your suggestions! Time for me to start talking to some mortgage brokers!

Ben Freiman · Answer

Hi Shawn welcome to BP! I wouldn’t sweat the car much sounds like you have that under control. I would focus on more the down payment money (assuming you’re using conventional loans from banks). Banks typically require 20-25% down for investment properties and that can be a substantial amount of cash. Definitely go talk to a few mortgage brokers so you can ask the right questions and they can tell you where you stand. That’s exactly what I did when I was getting started and it was time well spent learning about my options. Good luck!!

Joshua Hanning · Answer

I do agree with Anthony, but $4k left with $500 monthly payments would affect your approval amount. A refinance may be in order if you are unwilling to wait. Personally, I feel that being debt free (or at least debt free-er) allows for much less stress as well as the ability to save faster. Also, multiple inquiries won't negatively affect your credit if they occur within a 2 month (I believe) window, but soliciting now and then again later might.

Shawn Wade · Answer

@Matt K., thank you for your response! Yes, I am definitely going to do that. I appreciate you emphasizing situation AND goals. It's good to be understood.@Stephanie Potter, thank you so much! Yes, I do still have a full-time W2 job and I plan on continuing to work. I am leaning more towards a duplex/triplex and living in one of the units while the other/others are rented. As for trade lines, I do still have a couple credit cards open, but only use them -- one, mainly -- sparingly (i.e. when I need to rent a car if I'm out of town) and pay them off ASAP. I appreciate the welcome!

Shawn Wade · Answer

Hi Joshua! Thanks for your response and input! I did get my car refinanced in the past few years, so my monthly payment isn't nearly as much. And I've been paying more on it (sometimes double) so more is going to principal. It will be paid off in 2018. I have no problem waiting to get preapproved, but I just wanted opinions to see if it would make that much of a difference. I didn't want to wait and it not make too much of an impact than if I didn't wait. I mean, I'm still familiarizing myself with investing, making my goals, and creating my plan. So I have time. I'm in no rush. I want to be smart about it all.