What is a fix and flip loan?

A fix and flip loan is a short-term financing product designed to buy a distressed or undervalued property, fund renovation work, and be repaid after the property is renovated and sold. These loans focus on speed and flexibility rather than long-term mortgage terms. Many programs are structured to cover both the purchase price and renovation budget in one package.

How lenders determine down payment: LTV, LTC and ARV explained

Down payment requirements are set using several common underwriting metrics. Knowing these will help you estimate the cash you must bring to the table.

Loan-to-Value (LTV)

LTV compares the loan amount to the property’s current value (or purchase price). For purchase-only loans, LTV is the primary metric. For fix and flip loans, lenders often consider both current value and projected value after renovation.

Loan-to-Cost (LTC)

LTC measures the loan amount against the total project cost (purchase price + renovation budget). Lenders using LTC typically fund a percentage of total project costs and expect the borrower to supply the remainder as equity.

After Repair Value (ARV)

ARV is the estimated value of the property after renovations. Many fix and flip lenders use a Loan-to-ARV calculation, offering a percentage of the projected ARV (for example, 65%–75% of ARV). This method helps ensure the lender’s position if the property is sold post-rehab.

Rehab reserves and draw schedules

Even if the loan covers purchase and renovations, lenders commonly keep a rehab holdback and release funds based on work completed and inspections. That means you may still need upfront cash to close or to pay for initial work before the first draw.

Typical down payment ranges for fix and flip loans

Down payment percentages vary by lender, borrower profile, and property specifics. Typical ranges you will encounter include:

• Hard money and private lenders: 10%–30% equity or down payment, depending on experience, property condition, and loan terms.
• Bridge and specialty fix/flip programs: 10%–25% down when the lender funds both purchase and prioritized renovation budget.
• Programs using LTV/ARV: Lenders may provide up to 65%–75% of ARV, meaning the borrower’s equity (down payment + planned rehab) makes up the remainder.

Examples: If a property has a purchase price of $150,000 and an ARV of $250,000, a lender offering 70% of ARV could lend up to $175,000. If the renovation budget is $50,000, the borrower would provide the gap between purchase+renovation ($200,000) and the lender’s maximum ($175,000), which would be $25,000 in that example.

Key factors that influence how much down payment you’ll need

Every situation is unique. These are the most common variables that cause a lender to require more or less cash at closing:

• Credit score: Higher credit scores can lower risk for the lender and reduce down payment requirements. Many fix and flip programs accept scores starting around 620.
• Experience: Seasoned investors with completed flip track records often get higher LTV or lower down payments than new investors.
• Property condition and location: Poor condition, environmental issues, or unstable neighborhoods typically increase required borrower equity.
• Loan amount and minimums: Some programs have minimum loan amounts (for example, $100,000), which can affect deal viability for smaller properties.
• Rehab complexity and scope: Extensive structural work increases lender conservatism and borrower cash needs.
• Proof of ability to repay: Demonstrated financial stability and reserves can reduce perceived risk and lower upfront requirements.
• Bankruptcy and credit history: Recent bankruptcies or liens generally increase down payment requirements; some programs exclude recent bankruptcies within a set period.

Common eligibility requirements

Typical eligibility criteria for many fix and flip loans include:

• Minimum credit score (often around 620).
• Property that is non-owner-occupied (investment property).
• A solid renovation plan and realistic budget estimates.
• Experience preferred but not always required.
• Minimum loan amounts on some programs (for example, $100,000).
• Proof of financial reserves and ability to repay.
• No bankruptcy filings within a recent timeframe as specified by the lender.

Note: Programs and precise requirements differ. Always confirm eligibility details with the lender or loan specialist handling your application.

Ways to reduce the down payment you need

If your objective is to reduce upfront cash requirements, consider these strategies:

• Joint ventures or partners: Bring in a capital partner to supply part of the down payment in exchange for a share of profits.
• Private investors: Raise short-term private capital to cover down payment and early rehab costs.
• Seller financing: Negotiate that the seller carry part of the purchase on a short-term note, lowering the initial cash needed.
• Using home equity lines of credit: If you have existing home equity, a HELOC can supply down payment funds (consider costs and risks carefully).
• Down payment assistance from hard-money networks: Some lending networks offer programs that reduce initial cash required, especially for repeat or experienced borrowers.
• Negotiate purchase price and credits: Work the purchase contract to include seller credits that offset closing costs or initial repair needs.

Each option has trade-offs—equity dilution, higher overall cost of capital, or added complexity. Choose what matches your risk tolerance and investment strategy.

Typical loan terms, approval speed and extensions

Most fix and flip loans are short-term, often designed to cover renovations and sale within a year. Typical features include:

• Loan term: Commonly 6 to 18 months, long enough to complete rehab and sell the property.
• Interest and fees: Short-term loans often charge higher interest and upfront origination fees compared with long-term mortgages.
• Approval speed: Approval times vary, but many borrowers receive decisions quickly. In many programs, applicants receive loan approval within 7–10 business days so projects can start without long delays.
• Extensions: If you cannot sell within the original term, extension options are generally available — contact the lender before maturity to discuss terms and avoid penalties.

These attributes make fix and flip loans appropriate when speed and flexibility are priorities.

Example calculations: estimate your down payment

Example 1 — LTC approach:

• Purchase price: $120,000
• Renovation budget: $50,000
• Total project cost: $170,000
• Lender funds up to 80% LTC = 0.80 × $170,000 = $136,000
• Borrower equity required = $170,000 − $136,000 = $34,000 (down payment + reserves)

Example 2 — ARV approach:

• Purchase price: $150,000
• Estimated ARV: $260,000
• Lender offers 70% of ARV = 0.70 × $260,000 = $182,000
• Renovation budget: $50,000
• Total purchase + rehab: $200,000
• Borrower gap = $200,000 − $182,000 = $18,000

These examples show how lender methodology (LTC vs ARV) affects required borrower cash and why getting accurate repair estimates and ARV appraisals matter.

Preparing to apply: a practical checklist

To speed approval and present a strong application, gather the following:

• Purchase contract or offer details
• Detailed renovation budget and timeline (line-item estimates)
• Proof of funds for down payment and reserves (bank statements, investment statements)
• Credit score and authorization to run credit
• Proof of relevant experience or project references (if available)
• Photos and information about the property and neighborhood
• Exit strategy documentation — plan for sale or refinance once rehab is complete

Having these ready improves underwriting speed and reduces surprises at closing.

Why working with a broad lending network matters

Access to multiple lending partners increases approval chances for a wide range of applicants. Some national lending networks work with many banks and private lenders, expanding available programs and underwriting flexibility. That approach can help applicants who were previously denied by traditional lenders.

Some networks advertise quick prequalification that does not impact your credit score and report strong approval rates compared with typical market denial rates. A broader panel of lending partners also increases the odds of finding a program that fits your credit profile, experience level and project specifics.

How to get a personalized quote and next steps

If you want a personalized recommendation and an estimate of the down payment you’ll need for a specific deal, the fastest path is to submit project details, your credit profile, and a renovation budget to a loan specialist. They can run multiple programs and show which structure minimizes your cash requirement or optimizes profit potential.

Apply for a Fix & Flip loan or request a personalized quote — submit your project information and a specialist will review options tailored to your needs.

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

Common mistakes investors make with down payments

Avoid these errors that can derail a flip:

• Underestimating rehab costs — always include contingency funds.
• Counting on optimistic ARV without comparable sales to back it up.
• Not confirming draw schedules — you may need initial cash before draws begin.
• Ignoring reserve requirements — lenders often expect proof of funds for unexpected overruns.
• Relying solely on assumed rental or resale markets; have a clear exit plan.

When a larger down payment makes sense

Putting more equity into a project may reduce interest rates, expand loan options, and lower monthly payments. Consider a larger down payment if:

• You want a lower interest rate or better loan-to-value terms.
• The property or neighborhood has higher perceived risk.
• You plan to flip quickly and want to minimize carry costs.
• You are a first-time flipper and need to improve your loan profile.