Financing a purchase through Homesearch.com??

Question

I have seen properties on Homepath and Homesearch that I would like to bid on. Can someone suggest lenders in the Denver area that I could contact to get pre-qualified for financing on a property? Any suggestions on how to go about that process? Do most people come in with cash or hard money and then refinance out of it later? I assume financing should be in place before bidding on a property because if I win a bid, but can't finance the deal I will lose out on my earnest money. Any suggestions would be helpful, or just a nudge in the right direction.

Micki M. · Answer

@Tim Jonesanother avenue you could try would be government foreclosures (as @Matt M.suggested).  Homepath, HUDhomestore, etc are more open to renovation loans like 203k and Homestyle which wouldn't require such a high downpayment and are cheaper money so you don't have to worry about having as much cash for holding costs (you'll want to budget for those with HM).  Bear in mind that when writing offers for those websites you may need a real estate agent who is registered to bid on those, and it's always good to have someone who has been through the process since little mistakes can kill the deal.  Good luck!

Boris Portnov · Answer

@Mark Graham II, Great minds think alike, lol. There's actually a BP podcast that discusses HM lending for the purchase of rehabing, refinancing and hold and cash flow. Check out podcast #145.

Mark Graham II · Answer

@Boris Portnov, I was wondering the same thing actually....

Boris Portnov · Answer

Hey BP Community,

This a great discussion.  In considering making an offer on a 2 family homesearch property, however I don't want to jeopardize my earnest money should I be unable to get a  certificate of occupancy. I'm considering going the Hard Money route.

I was wondering if anyone had experience with using HM to close on the deal and then rehab and refinance into a conventional loan to hold and cash flow. I know typically flippers deal with HM. Will HM lenders deal with someone intending to hold onto the property. What are the HM lenders requirement?

Tim Jones · Answer

Great advice. Thanks, Micki M.

Bill S. · Answer

@Tim Jones I know Micki M. has experience and contact in this area. Perhaps she can point you in the right direction.

Definitely better to have money in hand or at least know where it's coming from and be really sure it will be there before bidding.

It's hard to get hard money without a significant down payment because it's so hard to find a deal (adequate equity) that they will lend on.

Bill S. · Answer

@Terrence Evans you need to talk to some hard money lenders. Typically they want the buyer to have skin in the game for fix and flip deals. You might be able to find one that will lend you the money without any skin in the game but most I've talked to won't do those deals.

Here they like you to have about 25% of your own funds for a fix and flip.

You are better off finding a private lender to fund your deal and to split the proceeds.

If you get a good enough deal some might finance 100%. You have to find the right deal and the right lender. If you do then you can use HM with none of your own money.

Tim Jones · Answer

@Terrence EvansIt depends on the deal I think. Some of the props have been listed before,  so there are already pics and info available. Perhaps you've even done a walk through. You could also go by the property and someone might actually let you in as well. I know that once you have a relationship with a HM lender it's significantly easier to make it happen. Also depends on the deal that you get. Say you win a bid on a property for 115k with 50k projected rehab costs, but the comps come in at 280k. In that case you would be well within the constraints of a HM loan. Obviously I haven't done a deal like that myself, but that information is coming from my brothers who have completed a transaction like that before.

Terrence Evans · Answer

thanks...

However the problem I could see there is typically one hasn't even looked at the property while it's up for auction. What lender is going to give you money when it doesn't know what it's dealing with?

William Allen · Answer

Just need to make sure you have proof of funds to send to them when the contract is initiated.  The easy part about using your own money is you can come up with POF quickly, it will get slightly more complicated with a HML but I'm sure it can be done.  Hopefully a HML or someone with more experience in that world can give you some advice.