How Fix and Flip Loans Differ from Traditional Mortgages

Fix and flip loans are purpose-built for investors and projects. Lenders focus more on the property’s after-repair value (ARV), the renovation plan, and your ability to execute the project than on long-term income documentation. Terms are typically short (6–18 months), interest-only payments are common, and funds can be structured to disburse in draws as work progresses.

Because these loans are project-driven, underwriting looks at:

• The estimated ARV and the renovation scope
• Your experience and track record (though many lenders accept first-time flippers)
• Down payment or available capital for the project
• Property type and whether it will be owner-occupied (most fix & flip loans require non-owner-occupied status)

Tip 1 — Prepare a Clear, Realistic Renovation Plan

Lenders want to see that your plan is thorough and realistic. A detailed renovation plan demonstrates that you understand the scope, timeline, and costs.

What to include in the plan

• Line-item budget for materials and labor
• Project timeline with major milestones
• Contractor or subcontractor bids (or quotes)
• Before and after comps showing expected ARV
• Contingency reserve (typically 5–15% of the renovation budget)

Tip: Use conservative estimates for ARV and budget more for surprises—lenders favor borrowers who build buffer into their plans.

Tip 2 — Strengthen Your Financial Profile

While fix and flip loans can be more forgiving than traditional mortgages, lenders still evaluate your financial stability. Improving a few key items can lift your approval odds significantly.

Key items to address

• Credit score: A minimum credit score of 620 is commonly required, but higher scores make approvals and terms easier.
• Reserves: Show liquid reserves to cover unforeseen costs or a stalled sale.
• Bank statements: Provide recent statements to demonstrate cashflow and reserves.
• Debt-to-income and other obligations: Have documentation to explain larger liabilities if they exist.
• Public records: Avoid recent bankruptcies; many programs disqualify applicants with bankruptcy filed within the last two years.

If your score is below preferred levels, consider delaying the purchase to improve credit, or provide stronger compensating factors (larger down payment, experienced rehab team, or proof of prior successful flips).

Tip 3 — Build a Strong Team and Provide Evidence

Lenders back projects that look well-managed. Showcasing a reliable team reduces perceived risk: contractors, project managers, real estate agents, and a reliable GC (general contractor) give lenders confidence that the renovation will finish on time and on budget.

What lenders want to see

• Signed contracts or written bids from licensed contractors
• Proof of contractor insurance and licensing
• Portfolio or references from contractors and agents
• If you’re a new flipper, a detailed plan showing your subcontractor relationships and oversight process

Tip: If you’re acting as your own GC, document your experience, timelines, and subcontractor agreements clearly.

Tip 4 — Choose the Right Property and Offer Strategically

Lenders underwrite the deal as much as they underwrite you. Picking a property with good upside and reasonable repair needs makes approval simpler.

Property selection checklist

• Market comps near the property that support your ARV
• Properties that require cosmetic or moderate rehab rather than full structural overhauls
• Clear title and reasonable zoning—properties with environmental or title issues complicate approvals
• Non-owner-occupied status—many fix and flip products require this

Offer strategy: Keep contingency clauses and inspection timelines that allow you to secure financing and manage due diligence. A lender-friendly timeline and clear contingency removal strategy help both purchase and lending processes.

Tip 5 — Submit Complete Documentation and Communicate Early

Incomplete applications are the top cause of delays or declines. Gather standard documents early, and be proactive with your lender about questions or risks.

Documents to prepare

• Driver’s license or government ID
• Recent bank statements (typically last 2–3 months)
• Tax returns or proof of income if requested
• Purchase contract and property information
• Detailed renovation budget and contractor bids
• Proof of funds for down payment or reserves

Communication tip: Assign one point of contact—either you or your broker—to manage questions and deliver documents quickly. Fast responses shorten underwriting timelines and improve closing certainty.

Common Mistakes to Avoid

• Underestimating renovation costs—always include a contingency.
• Relying on optimistic ARV comps instead of conservative market comparables.
• Changing contractors mid-project without lender approval.
• Skipping permits—unpermitted work can void draws and block closings.
• Failing to disclose past bankruptcies or legal issues—disclosure is better than surprise.

Typical Timeline and What to Expect

While timelines vary by lender and project, here’s a reasonable expectation for an experienced borrower with a complete package:

1. Pre-qualification/pre-approval: A soft review can be done quickly to determine eligibility.
2. Formal application and underwriting: With a complete file, many borrowers receive approval within 7–10 business days.
3. Closing: Once underwriting conditions are cleared, closing can occur within days of final approval unless title or escrow issues arise.
4. Renovation draws: Funds for rehab are usually released in draws tied to verified progress inspections.
5. Exit: Sell the property or refinance into a longer-term mortgage before the loan term ends.

If your timeline is tight, communicate that to your lender early—many lenders can accelerate processes for qualified borrowers with complete paperwork.

What Lenders Typically Require (Summary)

• Minimum credit score of 620 is common
• Property must be non-owner-occupied
• Detailed renovation plan and budget
• Experience preferred but not always required
• Minimum loan amounts may apply (for some products $100,000 is a typical floor)
• Proof of financial stability and ability to repay
• No bankruptcy filings within the past two years for many programs

These are typical guidelines and can vary by product and lender. If you meet most of these items, you’re in a strong position to be approved.

Rehab Budgeting and ARV Tips

Establishing a conservative rehab budget and supporting your ARV with recent comps is critical. Follow these steps:

1. Get at least two contractor bids for major trades (roof, HVAC, kitchen, bathrooms).
2. Use comparable sold properties within the same neighborhood that have similar finishes and lot sizes.
3. Factor in carrying costs (interest, taxes, insurance) and selling costs (agent commissions, closing costs).
4. Leave a contingency reserve of 5–15% of hard costs.

Lenders will run their own appraisal and may adjust the ARV; be prepared to explain differences and justify your numbers.

How to Apply — Practical Next Steps

1. Assemble your documents (ID, bank statements, purchase contract, bids)
2. Finalize your renovation scope and budget with at least one contractor estimate
3. Obtain pre-qualification or a soft pre-approval to understand loan sizing and terms
4. Submit the full application once your offer is accepted and include all supporting documents
5. Respond quickly to underwriting questions and schedule any required inspections

Ready to move forward? Apply for a Fix & Flip loan through this link: Apply for a Fix & Flip loan.

Rates are competitive and vary based on your credit score, experience, and project specifics. Reach out for a personalized quote today.

Checklist Before You Submit Your Application

• Purchase agreement fully executed
• Detailed, signed contractor bids
• Bank statements showing reserves
• Identification documents and any requested income verification
• Project timeline and contingency plan
• Exit strategy (list plan to sell or refinance)

Frequently Asked Questions (FAQs)