What is pre-approval for a fix and flip loan?

Pre-approval is a conditional commitment from a lender that outlines how much financing you may receive for a fix and flip purchase and renovation. It’s usually based on an initial review of your credit, financial profile, and the proposed project. A pre-approval is not a final loan agreement, but it gives you a clear budget and shows sellers and partners that you are a serious investor.

Why get pre-approved?

• Know your budget: Pre-approval defines the loan size and structure you’re likely to get, which helps you target properties that make sense financially.
• Speed up closings: With many documents already reviewed, the final underwriting and closing process can move faster.
• Stronger offers: Sellers prefer buyers with financing already in place. Pre-approval can make your offer more competitive.
• Avoid surprises: You’ll learn any credit or documentation issues early so you can fix them before you find a deal.

Typical eligibility requirements for a fix and flip pre-approval

While exact requirements vary by lender, many fix and flip programs look for the following:

• A minimum credit score (commonly a baseline around the high 500s to mid 600s depending on the program and your experience).
• Property must be non-owner-occupied (investment property).
• A clear renovation plan and budget, with realistic timelines and scope.
• Experience in real estate is helpful but not always required; a strong plan and team can compensate for limited experience.
• Proof of financial stability and ability to cover down payment, reserves, and certain costs.
• No recent bankruptcies or unresolved judgements in many programs (specific look-back periods vary).
• Minimum loan amounts may apply for some lenders and products.

These items are used to assess risk and to structure loan terms around your specific project.

How lenders evaluate a fix and flip project

Lenders typically assess projects using a few core metrics and documents:

• After Repair Value (ARV): An estimate of the property’s market value once renovations are complete. Lenders compare loan size to ARV to decide how much to fund.
• Loan-to-Cost (LTC) and Loan-to-Value (LTV): These ratios show how much the lender will finance relative to purchase price plus renovation cost or ARV. Expect underwriting to focus on whichever metric the product uses.
• Renovation budget and scope: Detailed line-item costs, timeline, and contractor quotes help lenders evaluate feasibility.
• Exit strategy: A clear plan for selling the property or refinancing after renovations (including projected sale price, carrying costs, and timeline).
• Borrower profile: Credit history, liquidity, experience, and proof of funds for down payment and reserves.
• Property condition and location: Market demand, comps, and any title or zoning issues that could affect resale.

Step-by-step: How to get pre-approved for a fix and flip loan

1. Prepare your financial profile

   Gather bank statements, tax returns, proof of liquid reserves, and business documentation if you plan to use an LLC. Clean up obvious credit issues where possible, such as minor errors or collections you can quickly resolve.

2. Know your credit score

   Request a copy of your credit report and address any inaccuracies. Many fix and flip programs require a minimum score, so understand where you stand and what you might need to improve.

3. Build a strong project package

   Create a clear plan that includes the purchase price, detailed renovation budget, contractor bids or estimates, project timeline, and projected ARV using recent comparable sales (comps).

4. Document your experience or your team

   If you have past flips, prepare a portfolio with before/after photos and returns. If you’re newer to flips, assemble a team of licensed contractors, an experienced project manager, and a real estate agent who understands flips—this reduces risk in the lender’s eyes.

5. Confirm proof of funds

   Most lenders want to see liquid reserves for down payment and initial draw coverage. Bank statements and statements for lines of credit or investor letters can be required.

6. Get a pre-approval or conditional commitment

   Submit your package to a lender or loan specialist. Many programs offer an initial soft review or pre-qualification that won’t impact your credit score. A formal pre-approval will include more checks and documentation but still may be conditional on a satisfactory appraisal and title search.

7. Use pre-approval to make offers

   With an approved budget and a conditional commitment, you can make competitive offers and move quickly on properties that meet your plan.

8. Close and draw funds

   Once an appraisal, title search, and final underwriting are complete, you’ll close and begin draws for renovation funds per the lender’s disbursement schedule.

Documents checklist for pre-approval

Prepare these items to speed up the process:

• Photo ID (driver’s license or passport)
• Recent personal and/or business bank statements (30–90 days)
• Recent tax returns and W-2s or 1099s
• Credit report authorization
• Purchase contract or property details (if you have a target property)
• Detailed renovation budget and contractor bids
• Project timeline and schedule
• Proof of funds for down payment and reserves
• Business documents (LLC operating agreement, EIN) if purchasing through an entity

Common loan structures and terms to expect

Fix and flip loans are often short-term, interest-only, and structured around renovation milestones. Some key features include:

• Short terms: Many programs offer loans that match the renovation timeline, commonly several months up to around a year or more depending on the product and exit plan.
• Interest-only payments: Monthly payments during construction may be interest-only to reduce carrying costs.
• Draw schedules: Funds for renovation are usually disbursed in stages as work is completed and inspected.
• Exit strategies: Lenders will ask whether you plan to sell after renovation, refinance to a longer-term loan, or hold the property as a rental.

How long does pre-approval take?

Times vary based on how complete your documentation is and the type of review being done. Many applicants receive pre-approval or a conditional decision within about 7–10 business days after submitting a full application and required documents. Some programs offer faster soft pre-qualification that does not involve a hard credit pull or full documentation.

Tips to improve your chances of pre-approval

• Be organized: Having a complete file with accurate documents cuts review time and builds lender confidence.
• Show a realistic budget: Conservative cost estimates and a contingency line in your budget reduce perceived risk.
• Clarify your exit strategy: A credible plan to sell or refinance increases approval odds.
• Work with professionals: Strong contractor bids, an experienced realtor, and an attentive loan officer make underwriters more comfortable.
• Provide reserves: Demonstrating liquidity for unexpected costs helps secure better terms and faster approval.
• Address credit issues proactively: Dispute errors and be transparent about past issues; lenders prefer honesty and remediation plans.

Common pitfalls and how to avoid them

• Underestimating renovation costs: Always include a contingency of at least 10–20% for surprises.
• Poor comps and ARV assumptions: Use realistic comparables and conservative ARV projections.
• Inadequate contractor documentation: Get licensed contractor bids and timelines in writing.
• No clear exit plan: Lenders want to know how you’ll repay or exit—be explicit and realistic.
• Insufficient reserves: Even with financing, you’ll need funds for the down payment, carrying costs, inspections, and unexpected delays.

Soft credit checks vs. hard credit pulls

Many lenders offer an initial soft-credit pre-qualification that gives you a sense of what you might receive without impacting your credit score. A full pre-approval or formal application normally requires a hard credit pull. Ask your loan contact which type of check they will perform during each stage so you can plan accordingly.

When to involve partners or investors

If you lack sufficient cash reserves or experience, bringing in a partner or private investor can strengthen your profile. Be ready to provide transparent agreements, return expectations, and an operating structure that the lender can review. Some lenders will consider partnerships if documentation and roles are clear.

Next steps: getting a personalized quote and pre-approval

To move forward, gather the documents listed earlier, finalize a renovation plan, and contact a loan specialist who knows fix and flip underwriting. A targeted conversation about your project will reveal what specifics and underwriting items your application will require.

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

Request a personalized fix & flip quote

FAQs

How is pre-approval different from pre-qualification?

Pre-qualification is often an informal estimate based on basic information and sometimes a soft credit check. Pre-approval is more formal and requires documentation. Pre-approval carries more weight with sellers because it shows a deeper review has been completed.

What documents are required for a pre-approval?

Typical documents include government ID, bank statements, tax returns, proof of funds, a detailed renovation budget, contractor bids, and a purchase contract or property details if you have a target property.

How fast can I get pre-approved?

Approval times vary, but many applicants receive pre-approval or a conditional decision within about 7–10 business days after submitting a full and accurate application and required documents.

Can I finance both the purchase and the renovation costs?

Yes. Many fix and flip loans are designed to cover both acquisition and renovation costs under a single loan, simplifying financing and reducing the need for separate lines of credit.

What loan term should I expect?

Fix and flip loans are usually short-term and aligned with the renovation timeline. Typical terms range from a few months to around a year or more depending on the lender and project. Discuss extension options up front so you know your options if the project runs long.

What if I don’t sell the property within the loan term?

If you need more time, many lenders offer extension options. Contact your loan officer early to discuss extensions and how to avoid penalties or default.

Do pre-approvals affect my credit score?

Initial soft-credit pre-qualifications usually do not affect your credit score. Formal pre-approval typically involves a hard credit inquiry, which can have a small short-term impact. Always ask whether a soft or hard pull will be used at each step.

Are there minimum loan amounts for fix and flip loans?

Some programs have minimum loan amounts. If you’re working on smaller projects, confirm the lender’s minimums before applying.

What if I have limited flipping experience?

Many lenders will lend to newer investors if you provide a strong renovation plan, credible contractor bids, proof of reserves, and an experienced team. Highlight your team’s qualifications and any comparable projects you have managed.

How can I get a personalized quote?

Gather your project details, documents, and budget, then request a personalized quote from a loan specialist to learn the specific options available to you. Rates are competitive and vary based on your credit score, experience, and project specifics. Reach out for a personalized quote today.