What it is
Timing drives a flip. The financing has to fund the purchase, release rehab draws on schedule, and end when the property sells, all inside a window measured in months.
Fix-and-flip programs finance a share of total project cost and cap the loan against after-repair value. The exact leverage depends on the lender, the deal, and your track record.
Experience matters to these lenders, and the second project is easier to finance than the first. A first project can still qualify with strong reserves, a realistic scope of work, and a purchase price with room in it.
Who it fits
- Investors renovating properties for resale
- Wholesalers moving into active projects
- Investors with established contractor relationships
- Borrowers with renovation experience
How it runs
- 1Submit The DealSend the property, the rehab budget, and your after-repair value analysis.
- 2Review TermsThe lender issues a term sheet covering rate, points, leverage, and the draw schedule.
- 3CloseShort-term rehab loans generally close faster than conventional purchase loans, because there is far less documentation to verify.
- 4Renovate & SellDraw rehab funds as work completes, then sell and repay the loan.
Questions
What does this financing cost?
Considerably more than a 30-year mortgage. Expect interest plus origination points, and count the monthly carry for every month the project runs. Price the whole carry into the deal, not just the rate.
What down payment is required?
Commonly 10% to 20% of total project cost. Experience and a lower loan-to-after-repair-value ratio reduce it.
What is ARV?
After-Repair Value, the projected sale price once renovations are complete. Programs generally cap the loan at roughly 70% to 75% of that figure.
How quickly can a file close?
It depends on the title work, the valuation, and how complete your scope and budget are. Short-term lenders move faster than conventional purchase underwriting because they verify less.
Other programmes
Fixed Rate Mortgage
A predictable rate and payment for the life of the loan.
FHA Home Loan
Government-insured loans with 3.5% down and flexible credit guidelines.
VA Home Loan
$0 down, no monthly mortgage insurance, reusable entitlement.
Rehab Loan
Finance the purchase and renovation of a home in a single mortgage.
USDA Loan
0% down loans for eligible rural and suburban homes.
Jumbo Home Loan
Financing for homes priced above the conforming loan limit.