Fix-and-Flip Loan Requirements: What You Need to Qualify

A fix-and-flip loan funds the purchase and renovation of a property you intend to resell for a profit. It's a specialized form of hard money — short-term, asset-based, and built for speed — with one defining feature: the lender lends against the property's after-repair value (ARV), not just what it's worth today. This guide breaks down exactly what you need to qualify, from leverage and down payment to the scope of work and documents.

How fix-and-flip leverage works

The most important thing to understand is how much a flip lender will advance, because it determines your down payment. Flip loans use two caps at once, and your loan is the lower of the two:

1. Loan-to-cost (LTC). A percentage of your total project cost (purchase + rehab). Lenders commonly fund up to ~85–90% of cost — meaning you bring 10–15% of the all-in budget.
2. ARV cap. A percentage of the after-repair value, typically ~70–75% of ARV. This ensures the loan stays well below what the finished property will be worth.

The loan can't exceed either limit. On a strong deal (bought well below ARV), the LTC cap governs; on a thin deal, the ARV cap kicks in and you bring more cash.

A worked example

Purchase:  $150,000
Rehab:     $50,000
All-in:    $200,000
ARV:       $300,000

LTC cap (90% of cost):  0.90 × 200,000 = $180,000
ARV cap (70% of ARV):   0.70 × 300,000 = $210,000

Loan = lower of the two = $180,000
Your cash in = 200,000 − 180,000 = $20,000 (plus closing costs/points)

Here the LTC cap governs. If the ARV were only $250,000, the ARV cap (0.70 × 250,000 = $175,000) would govern instead, and you'd bring slightly more. Model your deal against the 70% rule before you make an offer.

Requirement 1: A deal that pencils

The property is the primary qualifier. Lenders want to see:

• A realistic ARV supported by conservative comparable sales.
• A detailed scope of work with an itemized rehab budget.
• Enough margin — the classic flipper guardrail is the 70% rule: purchase + rehab should stay near or below (ARV × 0.70) − repairs.
• A credible exit — a resale at a supportable price within the loan term.

If the numbers don't work, no amount of borrower strength will save the file.

Requirement 2: Down payment / cash in the deal

As the leverage math shows, you bring the gap between the loan and your all-in cost — commonly 10–15% of the total project on an experienced borrower's strong deal, more on thinner deals or for first-timers. Plus you'll need:

• Closing costs and points at closing.
• Working capital to front the first phase of rehab before your first draw reimburses you.
• Reserves for carrying costs (interest, taxes, insurance, utilities) during the hold.

Requirement 3: Credit

Flip loans are asset-based, so credit is usually a soft screen rather than a hard gate — often a minimum around 600–660, mainly to flag serious title or fraud issues. A higher score and clean history can earn lower points, a better rate, and higher leverage, but a strong deal with modest credit is very financeable.

Requirement 4: Experience (helps, rarely required)

Many lenders tier terms by experience:

• First-time flippers can absolutely get funded, but often at lower leverage, a higher rate/points, and with a tighter scope review.
• Experienced flippers (a track record of completed projects) earn better leverage and pricing, sometimes up to the top of the LTC range.

Keep records of your completed flips — a simple deal sheet (address, buy, rehab, sale, timeline) strengthens every future application.

Requirement 5: The right entity

Most flips are financed through an LLC, since these are business-purpose loans. You'll provide the LLC's formation documents and EIN, and the members typically sign a personal guarantee.

The documents you'll need

• The deal: purchase contract, itemized scope of work and rehab budget, and ARV comparable sales.
• The property: address, photos, and any inspection reports.
• You / your entity: ID, LLC formation docs and EIN, and bank statements showing your down payment, points, and reserves.
• Track record (optional but valuable): a list of past flips.

Notably not required: tax returns, W-2s, or employment verification.

How the rehab funds are released

The renovation budget isn't disbursed at closing — it's held in reserve and released through a draw schedule. You complete a phase, request a draw, the lender inspects, and funds release (usually 1–3 business days). Budget working capital to front the first phase, and ask whether the lender charges interest only on drawn funds. See understanding draw schedules.

The exit is part of the requirement

Because a flip loan balloons, the lender effectively requires a credible exit — a resale at your projected ARV within the term. Build a buffer into your timeline and have a backup: an extension (usually for a fee) or a refinance into a DSCR loan if you decide to hold and rent instead.

Common reasons flip applications get declined

• ARV doesn't appraise. Overly optimistic comps are the number-one killer.
• Thin margin. The deal blows through the 70% rule, leaving no cushion.
• Underfunded borrower. Not enough cash for the down payment, points, and working capital to start the rehab.
• Vague scope of work. A budget the lender can't underwrite.
• No realistic exit within the term.

Almost all of these are foreseeable if you underwrite conservatively.

Bottom line

Fix-and-flip loan requirements center on the deal: a realistic ARV, a detailed scope, enough margin under the 70% rule, and a credible exit — financed to the lower of an LTC and an ARV cap. Credit and experience tier your terms but rarely make or break approval, and you'll close in an LLC with a short document set. Model your deal against the 70% rule, then get a quote with your purchase, rehab, and ARV. Compare options on our fix-and-flip loans page.

This guide is general information for real estate investors, not financial or legal advice. Leverage caps and terms vary by lender and deal.