Get Pre-Approval from Lender or Get Home Under-Contract?

[Kevin Hunt]

I have my eye on a few properties in my area and have a partner that is a Contractor/Carpenter. We have run the numbers on many of these properties and about ten of them seem like good investments and I'm ready to make offers to purchase.

I'm 21 years old and have a full-time job and a Credit Score of about 710. I have little money to put down but have a few family friends willing to invest up to $20,000. I'm currently looking for a Hard Money lender or Portfolio lender in my area that has worked with investors or are willing to lend based on the deal at hand rather than my lack of credit history.

My question for the Bigger Pockets Nation is this: Should I speak to the sellers and get the property under-contract FIRST or should I go to a conventional/private/hard money lender to get a loan pre-approval to ensure that the offer to the seller can actually be funded?

The classic chicken and egg question. So what are my options and what have all the pros done before so I know what to expect?

I love hearing from the Pros and can take criticism. Thanks in advance BP Nation!

[Bryan H.]

Doesn't hurt to figure out financing before you get a deal under contract. It's free and you won't be wasting your time making offers on homes you can't afford.

If you are going with traditional bank financing, get that $20k in your bank account and let it season for 2 months. Banks will question where the money came from if you don't. Then you have to explain it's a loan and they won't approve you without your own money to put down.

I'm wondering about your 'deals' that you are finding. Deals aren't easy to come by and you have 10? I'd suggest posting some examples and see what the community has to say. I'm assuming you are new and many new rehabbers under estimate repairs, neglect actual holding & transaction costs and over estimate ARV.