How To Make Money Lenders Approve Your Deal Even With Low Credit Score

A low credit score and a high debt-to-income (DTI) ratio will most likely spell a rejection for you in qualifying for a loan. If you’re in this situation, don’t get disheartened because you still have promising options. If you haven’t, we discuss  financing options for low credit scores and high debt-to-income ratio in another blog called which you can read here. 

Hard Money Lenders Step Up For You

With traditional banks, that would be the probable scenario. If you have a high DTI ratio or a low credit score, private or hard money lenders can be the answer to your prayers. They are also helpful and are very knowledgeable about local real estate investments. 

Hard Money Lenders operate to fill the financing gap. The presence of Hard Money Lenders signifies a robust real estate industry. You can do a google search for a list of the right Hard Money Lenders and a list of lenders near you will show up. You can also ask people in the same industry as yours what hard money lender or private lender they can recommend. In any case, you will always be able to draw a list of money lenders in your area to help you with your real estate investments. Hard Money Lender details their contact information on their respective web pages. You can learn more about the right Hard Money lenders and how to identify them in this article.

How can I qualify if I have a Low Credit Score or a High D/I Ratio?

We all have our own reasons why some of us have low credit scores or high Debt To Income Ratios. These conditions can ensure outright rejection from traditional lenders. But, you can still pursue that deal with Hard Money Lenders. They are far from being conventional and traditional in their approaches to lending. When you talk with a money lender, it is to your advantage that you know even the small details of your investment. It is to your advantage to come prepared and organized. This way, you can answer any question the lender throws at you about your deal.

Verifiable Income Sources

Make sure all your income sources are verifiable. That is, you can back them up with documents. Your claimed income must be verifiable by people of authority who can attest to it. Prepare all bank or income statements, receipts, or contracts that confirm your claims. These will be helpful when the lender validates your capability to pay your loan.

Real Estate Experience

Most Hard Money Lenders put a premium on the Real Estate Experience of an applicant. Real Estate experience can help you get a mortgage even if you have a high Debt To Income Ratio. Show the lenders that you have years of experience in the Real Estate Business. Show them that you were able to establish your real estate portfolio from zero despite the odds. Trade Partners and former clients can attest to the success of your deals. It is best if you have nurtured a good relationship with them for years. 

Projected Income Scenario

Show the Hard Money Lenders a projection of how the investment will impact your net income for the best. Show that the deal will be an extra income source. How to do this? Show a computation on how your income improves with the extra real estate investment. Highlight the projected income from the new investment, despite a new mortgage. A comparative hard money loan computation example can go like this:

In the illustration above, you will see an increase in the total income with the new investment. And after deducting the mortgage, you will still end up with a higher net income. The comparative table assumes that you secured a loan of 200,000 from a 250,000 property. The loan has an 8% annual interest paid over a period of 30 years.

The Debt-To-Income ratios for both scenarios hit 37%. Yet, what is more important is that you will have an increase of $1000 per month in income after the investment.

Bills in the Debt To Income Ratio?

The Debt to Income Ratio reflects your capacity to pay based on the monthly servicing of your debts. DTI also shows how much of your income goes to the servicing of the same debts. Loan Payments are not the only ones included in the DTI computation. Here is a sample list of included payment obligations in the computation.

• Student Loans
• Auto Loans
• Credit Card Payments
• Mortgage or Real Estate Loans Payments
• Monthly Rental Payments
• Child Support Payments
• Other Debt Obligations

Make a good presentation on the deal

When it is time to talk to your lender, preparation makes or breaks the deal for you. It is best to be knowledgeable about the details of your deal. This will help assure and convince a Hard Money Lender to approve your loan application. In essence, a nice presentation template should include the following:

1. Background (Personal and Business)
2. Partners, if any
3. Your Project
   1. Location of the project
   2. Your reasons for choosing the place.
   3. How much will the acquisition and rehab cost you?
   4. Labor and Material Suppliers
4. Projected Income, whether you end up renting the property or flipping it.
5. Exit strategy on the deal

Final Say, Don’t Despair

Burdened with a low credit score and a High DTI Ratio? Hard Money lenders and private lenders offer alternative loans to the conventional. You can lean on Five Hundred – 500 – credit score hard money lenders to help yous secure that deal. GL&L Holdings is a hard money lender willing to help out on your real estate deals. Call us now at (832) 770-9415 or send an email at info@gllholdings.com. Call us now for free consultations on your real estate investments. Our bi-lingual staff can help along with your deal.

You can also check our blogs for related information such as this guide to the hard money lending process to help you along your Real estate Investment journey. Feel free to leave your comments on our blogs and let us know how we can help you more.