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Fix-and-Flip Mortgage Loans
How do fix-and-flip mortgage loans work? Which wholesale mortgage investors are experts in fix-and-flip loans? What is the minimum credit scores generally required for fix-and-flip loans? What is the maximum loan-to-value? How is income calculated? What are typical rates on fix-and-flip loans? Are they borrower- or lender-paid? Can a fix-and-flip loan be closed under an LLC, and how does that work?
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Fix-and-Flip Mortgage Loans: Best Wholesale Lenders, Credit Requirements, Rates, LTV, Income Guidelines, and LLC Financing
This guide explains how fix-and-flip mortgage loans work. It covers wholesale lenders, credit score requirements, maximum LTV and ARV, interest rates, income guidelines, broker compensation, and LLC financing.
What Are Fix-and-Flip Mortgage Loans, and How Do They Work?
Fix-and-flip mortgage loans are short-term business loans for real estate investors who buy, renovate, and resell properties for profit. Unlike traditional mortgages, these loans focus on the purchase price, renovation costs, projected after-repair value (ARV), borrower credit, investment experience, and available cash reserves.
Many fix-and-flip lenders do not require traditional income verification, W-2s, tax returns, or debt-to-income calculations. Investors can often finance both the property purchase and renovation costs, and the loan can be closed through a limited liability company (LLC).
Most fix-and-flip loans last 12 to 24 months, have interest-only payments, and must be repaid when the property is sold or refinanced.
How Does Fix-and-Flip Financing Work?
A real estate investor finds a distressed or undervalued property, estimates the renovation costs, and figures out how much it could sell for after the work is done. The lender reviews the purchase price, planned renovations, estimated finished value, and the investor’s financial background.
After approval, the lender provides funds for the purchase at closing and typically places the renovation funds in a construction escrow account.
As renovations are finished, the lender releases rehab funds through construction draws, usually after inspecting the work.
Once renovations are done, the investor puts the property up for sale. The sale pays off the fix-and-flip loan, and the investor keeps any remaining profit after expenses. Some investors choose a different approach. Rather than selling, they refinance the property with a long-term DSCR mortgage and keep it as a rental.
What Are the Minimum Credit Score Requirements?
Credit score requirements can differ widely among wholesale fix-and-flip lenders. Borrowers with credit scores of 660 or higher usually have more financing options. Those with scores above 700 may get better rates, higher leverage, and lower reserve requirements.
Some lenders accept FICO scores from 620 to 659, but these loans may require larger down payments or carry higher interest rates.
Some private-money lenders advertise minimum scores around 600. However, these are not standard guidelines, so check with each lender about exceptions below 620. For example, RCN Capital publishes a minimum FICO score of 650 for its fix-and-flip program. Easy Street Capital advertises an EasyFix program with minimum credit scores starting at 600.
Experience is also important. An investor with a 660 credit score and a track record of successful projects may get different terms than a first-time investor with the same score.
What Is the Maximum LTV on Fix-and-Flip Loans?
Fix-and-flip lenders usually look at three main numbers: loan-to-value (LTV), loan-to-cost (LTC), and after-repair value (ARV). Loan-to-value compares the applicable loan amount with the property’s current value. Loan-to-cost measures financing against eligible purchase and renovation expenses.
After-repair value represents the property’s estimated market value after the planned improvements are completed. Many institutional fix-and-flip programs offer advances of about 80% to 90% of the purchase price. Some programs also finance up to 100% of approved rehab costs.
Total financing usually ranges from 65% to 75% of the projected ARV, though some programs may offer higher limits.
Example of a Fix-and-Flip Transaction
Suppose an investor purchases a distressed single-family home for $200,000 and needs $60,000 in renovations. The total acquisition and rehabilitation cost is $260,000. An appraiser determines that the property’s estimated after-repair value is $350,000.
If the lender offers 90% of the purchase price plus 100% of approved rehabilitation costs, financing would total $240,000.
However, if the lender limits total financing to 65% of ARV, the maximum loan would be $227,500 instead. At a 75% ARV cap, the $240,000 loan could fit, subject to the program’s other limitations. This is why borrowers cannot rely only on the lender’s advertised LTV to know their maximum financing.
How Is Income Calculated on Fix-and-Flip Loans?
Traditional residential mortgages typically consider a borrower’s documented income and monthly debts.
Fix-and-flip loans are different.
- Because these loans are designed for business-purpose investment transactions, many lenders do not use conventional debt-to-income underwriting or require employment income documentation.
- Instead, lenders focus on the investor’s available cash, real estate experience, credit, property value, renovation budget, and ability to repay the loan by selling or refinancing.
For example, an investor with substantial savings, a 720 credit score, and several successful renovation projects may qualify without submitting W-2s or personal income tax returns.
However, not verifying income does not mean there are no financial requirements. Lenders often ask for bank statements or other proof of assets to show you have enough money for the down payment, closing costs, renovation reserves, and monthly interest payments.
Which Wholesale Mortgage Investors Specialize in Fix-and-Flip Loans?
Many established institutional and private-money lenders focus on financing residential investment properties.
Kiavi
- Kiavi offers fix-and-flip financing and has a dedicated mortgage broker program.
- Its advertised financing includes acquisition leverage of up to 90% of the purchase price and total financing of up to 75% of the ARV, subject to qualifying requirements.
- Kiavi has published starting rates of around 8.25% and advertises broker yield-spread premium opportunities of up to 2.50%.
- Its online application and pricing tools make Kiavi a good option for mortgage brokers looking to grow their investor-lending business.
RCN Capital
- RCN Capital specializes in business-purpose investment loans, including fix-and-flip, rental property, and construction financing.
- Its published guidelines include a minimum FICO score of 650 and financing options that may cover up to 100% of eligible acquisition and rehabilitation costs for qualifying experienced investors, subject to ARV limits.
- RCN Capital offers broker and correspondent relationships, with compensation structures that may include fees or yield spread premiums.
Temple View Capital
- Temple View Capital provides fix-and-flip, bridge, and rental-property financing.
- Published program features include up to 90% acquisition financing, eligible rehabilitation financing, and total loan limits generally capped by ARV.
- Temple View Capital also accommodates business-entity borrowers and maintains a wholesale partner program.
- Mortgage brokers should check the current compensation schedule for fix-and-flip loans, as it may differ from DSCR loan compensation programs.
Lima One Capital
- Lima One Capital specializes in real estate investment financing, including fix-and-flip loans, construction loans, and long-term rental financing.
- Its published FixNFlip program has included a minimum credit score of 660 and investment experience requirements.
- Lima One Capital is a strong option for experienced investors looking for institutional financing.
Easy Street Capital
- Easy Street Capital offers private-money financing for real estate investments.
- The EasyFix program accepts credit scores as low as 600, so it may be a good choice for investors who do not meet higher institutional credit requirements.
- Published rates have started around 8.90%, although pricing depends on the transaction.
- Check wholesale participation, state availability, and any geographic restrictions before submitting a loan.
What Are Typical Fix-and-Flip Interest Rates?
Fix-and-flip loans usually have higher interest rates than traditional mortgages because they are short-term business loans for investment properties being renovated.
An illustrative market range is approximately 8% to 13%, although actual rates may be higher or lower. A current individual loan quote.
Borrowers with excellent credit, several completed flips, and a low loan-to-value ratio may get better rates. A first-time investor with a 620 credit score, limited savings, and a property needing major repairs may pay much higher borrowing costs.
Example of Monthly Interest Payments
Suppose an investor has an outstanding loan balance of $250,000 with a 10% annual interest rate.
- The monthly interest-only payment would be approximately $2,083.
- If the entire $250,000 remains outstanding for nine months, total interest would be approximately $18,750.
- An additional 2% origination fee would equal $5,000.
- The total interest and origination cost would be about $23,750.
- This does not include appraisal fees, construction draw fees, title costs, insurance, extension fees, or other expenses.
- Actual interest costs may vary because rehab funds are often disbursed in stages rather than all at once at closing.
Are Fix-and-Flip Loans Borrower-Paid or Lender-Paid?
Both borrower-paid and lender-paid broker compensation arrangements may be available, depending on the wholesale investor.
- Under borrower-paid compensation, the investor pays the mortgage broker an agreed origination fee at closing.
- For example, a 2% borrower-paid fee on a $300,000 loan equals $6,000.
- Under lender-paid compensation, the wholesale investor pays the broker via an approved pricing or yield-spread premium arrangement.
- For example, a 2.50% lender-paid yield spread premium on a $300,000 loan equals $7,500.
- Not all lenders offer lender-paid compensation, and the maximum allowed amount can vary.
- Business-purpose loans are usually not subject to certain federal consumer mortgage compensation rules, so their compensation structures can differ from those of traditional residential mortgages.
- However, business-purpose loans still require state licensing, disclosures, broker compensation rules, commercial financing rules, and anti-fraud measures.
Mortgage brokerages should confirm they have the legal authority and compliance approval before setting up compensation plans, especially if combining fees from different sources.
Can Fix-and-Flip Loans Close Under an LLC?
Yes. Many fix-and-flip lenders allow or require borrowers to close under a limited liability company. The LLC becomes the legal borrower and generally takes title to the investment property.
For example, if an investor forms ABC Property Investments LLC, the purchase contract, loan documents, and recorded title can identify ABC Property Investments LLC as the purchasing and borrowing entity.
The lender usually asks for the LLC’s formation documents, operating agreement, ownership details, and proof of who can sign for the company. Individual owners or managing members commonly undergo credit and financial reviews. Many lenders also require personal guarantees from one or more of the main owners.
A personal guarantee means the individual is still personally responsible for repaying the loan, even if the LLC owns the property. Some lenders will work with new LLCs because they focus on the owners’ finances and investment experience, not just business credit history.
Can Investors Refinance a Fix-and-Flip Loan Into a DSCR Mortgage?
Yes, provided the investor meets the refinance lender’s guidelines.
- Many real estate investors follow the BRRRR strategy: Buy, Rehab, Rent, Refinance, and Repeat.
- After completing renovations, the investor rents the property and applies for a long-term DSCR refinance.
- The lender evaluates the completed property’s value, qualifying rental income, ownership and cash-out seasoning, credit, and applicable DSCR requirements.
- Some investors use cash-out proceeds to recover part of their original investment and fund another acquisition.
- However, the projected ARV is not guaranteed to be accepted during refinancing, and cash-out options may be limited by seasoning rules.
Frequently Asked Questions About Fix-and-Flip LoansCan a First-Time Investor Get a Fix-and-Flip Loan?
Yes. Some lenders will finance first-time investors, but they may require higher credit scores, larger cash reserves, larger down payments, or stricter contractor requirements.
Are Fix-and-Flip Loans Available With a 600 Credit Score?
Some private-money lenders offer programs starting at a 600 FICO score. However, borrowers with lower credit usually face stricter terms and may need more cash or equity.
Can Fix-and-Flip Loans Finance 100% of Renovation Costs?
Yes. Certain programs finance all eligible rehab costs. Some programs cover all eligible rehab costs, as long as you meet acquisition and ARV limits. Rehab funds are usually paid out through construction draws. And fix-and-flip programs do not require personal tax returns or conventional employment verification. Lenders may still request bank statements, asset documentation, and information about the investor’s financial condition.
Do Fix-and-Flip Loans Have Prepayment Penalties?
Some programs do not have traditional prepayment penalties. Still, borrowers should check for minimum interest requirements, origination fees, extension fees, and other payoff terms.
Can an LLC With No Business Credit Obtain Financing?
Yes, depending on the lender. New LLCs may qualify if the owners have good credit, sufficient financial resources, and experience in real estate investing.
What Happens if the Property Does Not Sell Before Loan Maturity?
The investor may need to refinance, ask for a loan extension, add more funds, or pay off the balance from another source. Extensions may incur an extra charge and are not guaranteed.
Final Thoughts
Fix-and-flip mortgage loans give investors special financing to buy, renovate, and resell homes. Many programs offer large amounts for purchase and rehab without needing traditional income verification. Lenders like Kiavi, RCN Capital, Temple View Capital, Lima One Capital, and Easy Street Capital have different options based on your credit, experience, property, and available cash.
Before selecting a fix-and-flip loan, investors should compare the maximum financing available, interest rates, origination fees, construction draw procedures, required reserves, LLC requirements, and maturity terms.
A realistic renovation budget, a conservative resale estimate, and a dependable repayment strategy are essential for protecting the investment’s profitability. This version is under 2,000 words and uses only headings and paragraphs, with no charts, images, graphs, or columns. It is structured for publication on GCA Mortgage Forums or adaptation for Gustan Cho Associates.
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