House flipping is becoming increasingly popular among real estate investors. There are a lot of advantages that come with flipping houses, especially if you’re interested in making a potentially significant amount of money in a short amount of time. But the reality is that not everyone is in a position to begin buying homes, especially if they don’t have the strongest credit histories.

Fortunately, there are options available for those who can’t necessarily borrow from typical lenders. Private money lenders have opened doors for people interested in flipping houses and given them the opportunity to pursue properties that they otherwise would be unable to afford. Additionally, individuals interested in flipping houses are able to further finance other aspects of house flipping that might not initially occur to them. Below are some of the issues to consider when becoming a house flipper and how hard money lenders can eventually make flipping houses a reality for you.

Why Would a House Flipper Be Denied a Loan?

One of the main barriers to becoming a house flipper is being approved for a mortgage loan. Unfortunately, there is something of a multifaceted issue that comes with being a house flipper, namely that a lot of people interested in becoming house flippers are unable to be approved for home loans without flipping experience. House flipping comes with a lot of risk. If a flipper doesn’t calculate correctly, they may not sell their investment property as quickly as they expected, or for that matter may spend more on renovating the house than they expected. Therefore, their profit will be lower in the long term. This could cause them difficulty in paying off their mortgage loans.

Therefore, major financial institutions often prefer flippers that already flipped houses successfully. This may seem to be somewhat self-defeating; in order to become a successful flipper, you’ll first need to secure funding in order to invest in a property. Even if a house flipper has good credit, they might be denied the loans that they need.

Furthermore, a lot of people pursue house flipping in order to make money and improve their credit scores. This means that they might be applying for home loans with bad credit. Due to the financial crisis of 2008, many major financial institutions have rules and regulations barring them from approving people with bad credit scores for major loans. However, about one-third of all Americans have poor credit. Those people still need to be able to take out loans. What are they supposed to do?

How Can Private Money Loans Work for Potential Flippers?

Private money lenders often work with new house flippers; in fact, some of them specialize in those types of loans. Private money lenders are often more willing to work with applicants who have bad credit scores.

Rather than focusing on the credit histories of applicants, private money lenders often focus on the collateral offered for the approval of the loan. This collateral may come in the form of a property the applicant already owns. The equity in that property, rather than a credit score, will determine whether or not the applicant is approved. Hard money lenders tend to be more flexible with their applicants and more willing to overlook issues that would normally have them turned away.

Private money lenders can sometimes be more flexible than major financial institutions. They do still need to be paid, and in full. But they may allow borrowers more time to make payments when necessary. This can be particularly helpful for first time house flippers, who may find it more difficult to predict when they will be able to make payments.

There are a lot of issues and eventualities that house flippers need to consider before applying for loans. But with a private money lender, they can make their house flipping dream a reality.