What do you mean, no pre-approval?
Why Private Lenders Don’t Pre-Approve Borrowers—and Why Deals Must Be Under Contract
If you’re new to private lending, you might be surprised to learn that private lenders don’t offer pre-approvals like traditional banks. Instead, they evaluate each deal only after the property is under contract. This may seem counterintuitive at first, but once you understand how private lending works, it makes perfect sense.
Private Lenders Fund Deals, Not People
Unlike conventional lenders who focus on credit scores and income history, private lenders prioritize the investment itself. They care more about the property’s value, the deal’s structure, and the exit strategy than a borrower’s personal financial profile.
This means a borrower’s financial strength alone isn’t enough to secure a loan—there needs to be a solid deal in place. Without a specific property under contract, there’s nothing to evaluate.
Real Estate Markets Change Daily
A pre-approval assumes lending conditions will stay the same for weeks or months, but real estate moves fast. Property values fluctuate, interest rates shift, and market conditions evolve. Private lenders must analyze the deal as it stands today, not based on assumptions made weeks ago.
Every Property Is Unique
Banks use rigid, standardized guidelines for pre-approvals, but private lending is flexible. Each deal is different—location, rehab costs, ARV, and borrower experience all factor into the decision. Since private lenders assess risk on a case-by-case basis, they can’t offer a blanket approval without reviewing the actual property details.
Commitment Ensures Serious Borrowers
Requiring a contract in place filters out tire-kickers and ensures the borrower is serious. If a lender were to approve loans before a property is under contract, they’d waste time reviewing deals that may never materialize. Instead, they focus on real opportunities where the borrower has skin in the game.
How to Approach Private Lenders the Right Way
If you’re looking for private funding, don’t ask for a pre-approval. Instead, lock up a deal, then bring it to your lender with:
The purchase price and contract
Estimated rehab costs (if applicable)
The property’s after-repair value (ARV)
Your exit strategy (flip, rental, refinance, etc.)
By coming prepared with a real deal, you’ll get a faster decision—and a higher chance of securing funding.
Final Thoughts
Private lending isn’t about pre-approvals—it’s about funding great deals. If you’re serious about leveraging private capital, focus on finding solid investment properties first. Once you have a contract in place, the right lender will be ready to move quickly.
Need help structuring your next deal? Let’s talk.
(682) 294-0106 info@quantumfunding.co
