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Loan Considerations for Fix & Flip / Short-Term Investors
Loan Considerations for Fix & Flip / Short-Term Investors
Securing conventional financing on a fix & flip or short-term loan is not recommended.  Most conventional lenders sell off their mortgages to investors on the secondary market.  If the loan is paid off early (before six payments are made), the investor has not recovered their initial investment.  The investor will attempt to recover their loss from the lender, who will ultimately come after the loan originator.  The loan originator would then be obligated to pay back any premium paid out by the lender.  If such activity becomes habitual with the loan officer, the lender can cease doing business with them and their firm.
Furthermore, conventional loans require conventional appraisals.  The lender will require that the home is a) habitable in its present state b) in at least ‘average' condition and c) not in need of any repairs greater than 2% of the purchase price.  All three points can be challenging to overcome for investments properties, especially bank owned homes.  Consequently, many investors use private money, hard money, home equity lines of credit, cash or specialty investment lenders to avoid failing a conventional appraisal.   All of the aforementioned sources of funds can be ... more

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