Quick summary

Fix and flip loans are short-term, purpose-driven loans designed to buy and renovate investment properties quickly. Traditional mortgages are long-term loans designed for owner-occupiers or long-term buy-and-hold investors. The two loan types differ in speed, underwriting, terms, qualification criteria, and how funds are disbursed.

What is a Fix and Flip Loan?

A fix and flip loan is a short-term loan that combines funds for purchasing a property with funds for renovating it. These loans are built for investors and real estate professionals who plan to renovate a property and sell it for a profit within a relatively short timeframe. Key features typically include faster approval, short loan terms, and renovation draws that are released as work progresses.

Common characteristics

• Short terms (often 6 to 18 months)
• Faster underwriting and approval
• Funds available for purchase and renovation in one loan
• Interest-only or pay-interest-during-construction structures
• Renovation disbursements tied to project milestones or draws

What is a Traditional Mortgage?

A traditional mortgage is a long-term loan used to buy a home or an investment property where the borrower plans to hold the property for a long time. These loans are structured with predictable monthly payments and amortization schedules over 15, 20, or 30 years (common terms) and are underwritten with a focus on long-term repayment ability and property habitability.

Common characteristics

• Longer loan terms (commonly 15–30 years)
• Monthly principal and interest payments (amortizing)
• Stricter documentation and underwriting
• Lower interest rates compared with short-term investment loans (typically)
• Designed for owner-occupancy or long-term rental strategies

Head-to-head: How Fix and Flip Loans Differ from Traditional Mortgages

1. Purpose and timeline

Fix and flip loans: Designed to acquire and renovate properties quickly and then exit (sell) within a short timeframe. Typical term lengths give you time to renovate and sell rather than hold long-term.

Traditional mortgages: Designed for long-term ownership. Not meant to provide construction draws or to be paid off quickly through a sale.

2. Approval speed and documentation

Fix and flip loans: Underwriting is faster and more flexible. Lenders focus on the after-repair value (ARV), the borrower’s track record, and project plans. Some programs reduce document requirements and prioritize speed to close.

Traditional mortgages: Require full documentation of income, employment, assets, tax returns, and property appraisal. Approval takes longer due to stricter underwriting and regulatory requirements.

3. Qualification criteria

Fix and flip loans: Typical minimums often include a credit score threshold (commonly around 620), proof of financial stability, and a clear renovation plan. Experience in real estate is preferred but often not required. Recent bankruptcies may disqualify some applicants (requirements vary).

Traditional mortgages: Strong emphasis on stable income, debt-to-income ratio, credit history, and full documentation. Down payment requirements and loan programs vary widely depending on loan type (conventional, FHA, VA, etc.).

4. Loan structure and interest

Fix and flip loans: Usually interest-only during the loan term with interest charged on the outstanding balance. They often have more flexible repayment options tied to the project timeline.

Traditional mortgages: Amortizing loans with scheduled principal and interest payments. Interest rates are often lower because of the longer-term nature and different risk profile.

5. Funding for renovations

Fix and flip loans: Designed to fund both purchase and renovation costs in one loan. Renovation funds are commonly released in draws as work is completed and inspected.

Traditional mortgages: Typically do not fund renovations as part of a purchase loan (exceptions exist, such as FHA 203(k) and home renovation programs, but these require specific eligibility and paperwork).

6. Collateral and loan-to-value (LTV)

Fix and flip loans: LTV calculations often use purchase price plus renovation budget or ARV. Many lenders limit LTV to ensure sufficient equity for exit strategies.

Traditional mortgages: LTV is typically calculated against the appraised market value and is a major factor in qualifying and setting rates (lower LTVs often get better terms).

7. Exit strategy expectations

Fix and flip loans: Exit by selling the renovated property or refinancing into a longer-term loan if needed. Lenders commonly expect a clear plan to sell after improvements.

Traditional mortgages: No short-term exit expectation—borrower intends to keep property long term and repay over many years.

Typical Eligibility Checklist for Fix and Flip Loans

While specifics vary by lender, many fix and flip programs require:

• A minimum credit score (commonly around 620)
• Proof of financial stability and ability to repay
• A renovation budget and realistic scope of work
• Property must be non-owner-occupied (investment property)
• No recent bankruptcy filings in the last two years (requirements can differ)
• Minimum loan amount (some programs have minimums, e.g., $100,000)
• Experience in real estate preferred but not always required

These criteria help lenders evaluate project feasibility and investor reliability.

Typical Loan Benefits for Fix and Flip Financing

Investors choose fix and flip loans because they:

• Provide fast approval so you can close quickly on deals
• Allow you to finance both purchase and renovations in one loan
• Offer flexible terms that can be tailored to project timelines
• Use draw schedules so renovation funds are available as work completes
• Support a focus on short-term investment returns rather than long-term amortization

Costs to Expect: Fees, Interest, and Other Charges

Fix and flip loans generally have higher short-term interest rates than long-term mortgages because of the increased risk and speed. In addition to interest, expect fees such as origination fees, draw fees, inspection fees, and lender-specific closing costs.

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

Timeline: From Application to Funding

Typical timelines for fix and flip loans are much shorter than for traditional mortgages:

• Application and initial review: a few days
• Underwriting and approval: often within 7–10 business days for many projects
• Closing and funding: can happen quickly once underwriting completes, enabling rapid starts

Because timing is critical in competitive investment markets, many investors rely on lenders who can approve quickly and release renovation funds on schedule.

When to Choose a Fix and Flip Loan vs. a Traditional Mortgage

Choose a fix and flip loan if:

• Your plan is to buy, renovate, and sell within months to a year or so.
• You need renovation funds in addition to acquisition financing.
• You want a lender experienced with construction draws and short-term exits.
• Speed is essential to secure a deal.

Choose a traditional mortgage if:

• You plan to live in the property or hold it as a long-term rental.
• You prefer lower long-term interest rates and amortized payments.
• You don’t need significant renovation funds or you’ll use separate construction financing.

How the Draw Process Works for Renovation Financing

Fix and flip loans frequently use a draw schedule. Typical steps include:

1. Initial disbursement at purchase closing (to pay the seller)
2. Subsequent draws released after work phases complete (framing, plumbing/electrical, finishing, etc.)
3. Inspections or receipts required before each draw
4. Final draw on project completion and final walk-through

This structure reduces risk for the lender and ensures renovation funds are used for the intended work.

Common Risks and How to Mitigate Them

Fix and flip projects carry unique risks. Here are common issues and mitigation strategies:

• Unexpected repair costs — build a contingency into your budget (10–20% recommended).
• Market downturns — research comparable sales and avoid overpaying; target conservative ARV estimates.
• Work delays — choose reliable contractors, set realistic timelines, and allow buffer time.
• Funding shortfalls — use a lender familiar with draws and who approves adequate renovation budgets.
• Sales challenges — price competitively and plan marketing and staging in advance.

Tips to Improve Your Chances of Approval

• Prepare a clear rehab plan and realistic budget with line items and contractor bids.
• Provide historic project examples or references if you have rehab experience.
• Keep credit in good standing and bring documentation of assets to demonstrate reserves.
• Choose properties with clear upside and strong comparable sales nearby.
• Work with a lender that understands fix and flip timelines and has a streamlined draw process.

Case Study Examples (Illustrative)

These examples show how financing choices affect project outcomes. Values are illustrative and simplified for clarity.

Example A — Fix & Flip Loan

Purchase price: $150,000 • Renovation budget: $50,000 • Loan term: 12 months • Lender provides purchase plus renovation draws. Investor completes renovations, sells property for $275,000, repays loan and fees, and realizes net profit after costs.

Example B — Traditional Mortgage + Separate Renovation Loan

Purchase price: $150,000 funded with a traditional mortgage. Renovation financed through a second loan or personal funds, adding complexity and potentially higher combined costs. The long-term mortgage may be suitable if the investor plans to hold the property instead of flipping.

These scenarios highlight that fix and flip loans can simplify the transaction by combining purchase and renovation financing into a single, short-term product.

How to Choose the Right Lender

Look for lenders who:

• Understand fix and flip projects and offer fast approvals
• Provide clear draw schedules and inspection protocols
• Have transparent fees and straightforward terms
• Can explain eligibility requirements and help tailor the loan to your timeline

If you want a quick personalized quote and help evaluating options, consider starting the conversation with a specialist who focuses on short-term renovation financing: Get a personalized fix & flip loan quote.

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

Frequently Asked Questions

How fast can I get approved for a Fix & Flip loan?

Approval times vary, but many applicants receive loan approval within 7–10 business days when the submitted documentation and rehab plan are complete. Faster approvals are possible when lenders prioritize speed and have streamlined underwriting for investment projects.

What’s the interest rate for Fix & Flip loans?

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

Can I finance both the purchase and the renovation costs?

Yes. Fix and flip loans are typically structured to cover both the property purchase and the renovation expenses, with renovation funds released on a draw schedule tied to progress inspections.

How long is the loan term for a fix and flip loan?

Typical terms range from 6 to 18 months, depending on the lender and the scope of the project. Shorter terms are common because the loan is intended to cover a single renovation and resale cycle.

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

If you need more time, many lenders offer extension options. Contact the lender before the loan term ends to discuss extension fees, revised terms, or alternative exit strategies to avoid default or penalties.

Do I need prior flipping experience to qualify?

Experience is often preferred but not always required. Lenders will look carefully at your rehab plan, contractor bids, and financial reserves to evaluate project feasibility. New investors with strong documentation and contingency plans can still qualify.

What minimum credit score is typically required?

Many fix and flip programs require a minimum credit score around 620, though thresholds vary. Stronger credit can help secure more favorable terms and faster approvals.

Is a larger down payment required for fix and flip loans?

Down payment and loan-to-value requirements vary by lender and property. Some programs require higher down payments than traditional mortgages to account for the short-term investment risk. Discuss LTV and down payment expectations with your lender.

How are renovation funds monitored?

Renovation funds are usually released in draws based on completed work. Lenders commonly require inspections, contractor invoices, or receipts before approving draws to ensure the project is progressing as planned.

What should I include in a renovation plan?

A credible renovation plan includes a detailed budget, contractor bids or estimates, a realistic timeline, a scope-of-work list, contingency amounts, and a target after-repair value (ARV) supported by comparable sales.