How to get a mortgage loan to flip a house

What type of loan is best for house flipping?

Hard money loans. Since lenders do not necessarily look at your credit in this case, hard money loans may be easier to qualify for. While lenders could pull your credit to see your debt-to-income ratio, they usually do not look at the score itself. Another perk to hard money loans is that the approval time could be quite a bit faster, since there is less underwriting. You could also qualify with blemishes on your credit. The downside, on the other hand, is that interest rates and origination fees will likely be far more costly than with traditional mortgages.

Home equity line of credit (HELOC). These are similar to using a credit card, except that your house is used as collateral. Based on the equity of your current property, you get a revolving line of credit, with two different phases, the draw and repayment periods. During the draw period, you only pay interest on the line of credit you are using. During the repayment period, you pay both the principal and interest back and can no longer draw on the line of credit.

Cash-out refinance. In this instance, you use the equity from another home you own to invest in the home you are flipping. Since it is based on an existing primary residence, cash-out refinance is one of the cheaper financing options. The home is already finished, so lenders are less fearful of risk.

Loans from your personal network. These loans are from your family, friends, or associates who want to back your project. Typically, the money will be lent in exchange for a share of potential profits or interest payments.

Crowdfunding. The benefit of crowdfunding is that if you have enough investors, you can fund the project fairly quickly. It also means you do not have to qualify for a loan or fund the whole thing yourself. The downsides include having to market the project, pitch your business plan, and prepare for rejection. It could also mean you receive a smaller percentage of the profit, depending on your arrangement.

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