What are the requirements for a fix and flip loan?
A fix and flip lender typically requires 10 to 20 percent of the purchase price plus reserves, a credit score of 640 or higher, a line-item rehab budget with a scope of work, an after-repair value supported by comparable sales, and an exit plan, with the loan capped at 65 to 75 percent of the after-repair value. Experience improves leverage and rate but a first flip can be approved with a strong contractor and budget.
The checklist
| Requirement | Typical standard |
|---|---|
| Down payment | 10 to 20 percent of purchase price; 100 percent of rehab often financed |
| Credit score | 640 and up; some lenders 620 or no minimum at lower leverage |
| Reserves | 3 to 6 months of interest plus working capital for the first draw |
| Scope and budget | Line-item, with a contractor bid |
| After-repair value | Supported by three or more comparable sales of renovated homes |
| Loan caps | 80 to 90 percent of cost; 65 to 75 percent of ARV |
| Exit | Sale comps with a margin, or a rental refinance that works as a backup |
| Entity | LLC vesting accepted, usually preferred |
| Insurance | Builder's risk or vacant property policy with the lender as mortgagee |
| Experience | Improves terms; not required for light rehab |
Ranges vary by lender.
The two value tests
The loan is the lower of the cost cap and the ARV cap. Purchase $300,000, rehab $75,000, ARV $500,000: 90 percent of cost is $337,500 and 70 percent of ARV is $350,000, so the loan is $337,500 and you bring $37,500 plus closing costs and working capital.
What the lender reads first
The margin. ARV minus purchase, rehab, carrying costs, and selling costs of 6 to 8 percent should leave a real profit. Lenders decline flips with thin margins because a small overrun turns them into losses.
The ARV. Comparable sales of renovated homes within a mile and six months, at the finish level you plan. A projected ARV above the best comp is a red flag.
The budget. Cost per square foot in line with the market and a contingency of 10 percent.
The contractor. Licensed, insured, with references. Owner-builders are accepted by some lenders with a track record.
Experience tiers
Most lenders sort borrowers by completed flips in the last 36 months: zero, one to two, three to five, and more. Each tier improves leverage by a few points and the rate by a quarter to a half point. A first flip usually lands at 80 to 85 percent of cost and 65 to 70 percent of ARV.
Documents to expect
- Application and personal financial statement.
- Two months of bank statements.
- Purchase contract.
- Scope of work and contractor bid.
- Comps supporting the ARV.
- Entity documents and insurance.
- Track record: addresses, purchase and sale prices, dates.
How CommFi handles it
One application with the contract, scope, and comps. Our lending desk prices the flip loan first and funds direct when it fits. When a flip specialist with better terms for your experience tier is the right match, the desk searches a database of 7,000+ lenders and the ones that fit compete for it. Zero upfront fees.
Related reading
Related questions
- How much money do I need for a fix and flip loan?
- Typically 10 to 20 percent of the purchase price, plus closing costs, three to six months of interest, and working capital for the first rehab phase.
- What credit score do flip lenders require?
- Around 640 with most lenders. Some go to 620 or have no minimum at lower leverage.
- Will the lender finance the rehab?
- Usually 100 percent of the budget, held back and released in draws as work is completed and inspected.
- Do I need experience to get a flip loan?
- Not for light rehab. Experience improves leverage and rate, and heavy rehab usually needs prior projects or an experienced contractor.
- What is the maximum flip loan?
- The lower of 80 to 90 percent of cost and 65 to 75 percent of the after-repair value.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.