Fix and Flip Loan Requirements: What You Need to Qualify
Fix and flip lenders evaluate deals differently than conventional lenders. Here's exactly what they look at — and what you need to have ready before applying.
Fix and Flip Loan Basics
A fix and flip loan (often called a hard money loan) is a short-term financing product for investors buying distressed properties to renovate and sell for a profit. Unlike conventional mortgages, these loans are primarily underwritten based on the property's After-Repair Value (ARV) — the estimated value once renovations are complete — rather than the borrower's personal income.
Primary Qualification Factors
1. After-Repair Value (ARV) and Loan-to-ARV
The most important number in a fix-and-flip loan is the ARV — what the property will be worth after renovation. Lenders typically limit their exposure to 65-75% of ARV:
- 65% ARV (conservative lenders): On a $300,000 ARV property, maximum loan = 95,00010,000
- 70% ARV (standard): Maximum loan =
- 75% ARV (aggressive): Maximum loan =
The loan covers both the purchase price and the rehab budget (construction holdback). If your total project cost (purchase + rehab) exceeds the lender's ARV limit, you must bring additional cash to the table.
2. Credit Score
Fix and flip lenders are more flexible than conventional lenders on credit:
- Most programs: 550-580+ FICO minimum
- Standard pricing programs: 620+ FICO
- Best rates: 660+ FICO
Unlike DSCR loans, credit score has less impact on fix-and-flip underwriting because the loan is primarily secured by the asset (ARV), not the borrower's creditworthiness.
3. Investor Experience
Lenders evaluate your track record in fix-and-flip investing:
- First-time flippers: Higher down payment required (30-35%), lower LTV, sometimes a co-borrower with experience required
- 1-5 completed flips: Standard programs; 20-25% down; 65-70% ARV
- 5+ completed flips: Best programs; 15-20% down; 70-75% ARV
Document your experience with prior closing statements (HUD-1 or CD) showing you purchased and sold fix-and-flip properties.
4. Exit Strategy
Since these are short-term loans (6-24 months), lenders want to understand how you'll repay. The two primary exit strategies are:
- Sale: Renovate and sell for a profit within the loan term
- Refinance: Renovate, rent, then refinance into a DSCR loan (BRRRR strategy)
5. Renovation Budget and Scope
You'll need to provide a detailed scope of work (SOW) and renovation budget. Lenders want evidence you've priced the renovation accurately. Requirements vary by lender:
- Detailed line-item budget with contractor bids
- Contractor credentials and licensing (in some states)
- Proof of insurance from your contractor
Down Payment Requirements
- First-time flipper: 25-35% of total project cost
- Experienced investor: 15-25% of total project cost
Draw Schedule: How You Access Rehab Funds
The rehab portion of a fix-and-flip loan is not disbursed upfront. It's held in a "construction holdback" and released in draws as work is completed. The process:
- Complete a phase of renovation work
- Request a draw from the lender
- Lender sends an inspector to verify work completion
- Lender releases the draw (typically within 2-5 business days)
Budget for carrying costs during the draw process — inspections take time and draws aren't instantaneous.