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Fix and Flip Loans
What are Fix and Flip Loans?
Is there a gap between your capital and the property purchasing and renovating cost? Fill this gap through the fix and flip loans. Fix and flip loan is a short-term home loan that is needed to purchase an inexpensive property. Fix and flip mortgages cover the purchasing cost of real estate, its renovation, and construction cost. It is a quick way to get the money for borrowing the collateral property. The borrower has to repay the loan after selling the property within 12 to 36 months.
A fix and flip loan is a short-term loan used to purchase cheaper properties, renovate (fix) them and sell (flip) them at a higher rate than the buying cost to get the profit. House flipping is a good option of investment that involves purchasing inexpensive houses and selling them after renovation to get a good amount. Thinking about becoming an investor in California? Consider fix & flip.
If you considering getting a traditional loan, the lender or bank will deeply evaluate your credit history, which is an extensive and time taking process. You may also be disqualified from the conventional loan if you have a low credit score. Fix and flip rehab loans will save you from a long documentation process. Saving time means also saving money and energy.
How to Qualify for a Fix and Flip Loan?
Like other types of traditional loans, you have to follow a few stages to qualify for a fix and flip loan. But unlike conventional loans, the steps for qualifying for fix and flip loans are too easy.
Worth of the Property, no the Credit Score
For the fix and flip loan, the lender is more concerned about the worth of the property rather than the credit score. The borrower with a bad credit score can also qualify for the loan if he has an experienced flipper. On average, the credit score should be more than 550, but it may vary among lenders. This is considered the essential stage of fix and flip loans. Through the appraisers, the lender analyzes the property value. Once the property is appraised, the lender can lend in a short period.
Lender and the Property
The lender is less concerned about the credit of the borrower because the lender is with the collateral. If the borrower defaults (unable to repay the loan), the lender has a right to sell the property to generate profit.
Size, Terms and Rates of the Loan
The loan size varies depending on the cost of the property, and the average interest rate for hard money loans is 12%, sometimes more or less. Few lenders in Los Angeles and other regions of California also offer loans with a 7.5% interest rate.