Fix & Flip Loans
As a successful fix-and-flip investor, you know there is nothing more important to your bottom line than quick access to capital. In a competitive industry where cash is king and lucrative deals are snapped up quickly, it is critical to have cash available to execute purchase contracts, compete at foreclosure auctions, close cash-only deals, and fund construction. If your business strategy includes using borrowed capital for your next rehab project, a fix-and-flip lender can approve and fund your loan in 5 to 10 days—some can fund even faster for rush deals.
What Fix-and-Flip Lenders Look For
While you are choosing an experienced, dependable fix-and-flip lender to finance your deal, you should also be aware of four key underwriting components that will affect whether your loan might be approved—the location of the property, the value of the property, your level of experience and your financial standing and credit history. Here’s how those factors play a role in a hard money lender’s approval decision:
- Where is the property located?
Your project’s location is an important factor in a fix-and-flip loan approval. State regulations can affect what lenders are able to offer in terms of loan type, interest rates, fees, points, loan-to-value ratio, loan length, and prepayment penalties. Be aware that some lenders operate in a limited geographic area, and many do not finance properties in high-crime areas or in rural areas where population size is limited.
- What is the value of the property?
Your fix-and-flip lender will need to know the as-is value of the property, your estimate of the cost of repairs, and the property’s estimated after-repair value (ARV). Although your lender will conduct its own valuation, you will need to present an estimate based on your research of neighborhood comps and your knowledge of the property’s condition, and estimated construction costs.
- What is your level of experience?
If you have had past success flipping houses for a profit, your lender may be willing to negotiate loan-to-value ratio, rates, and points. Some lenders will work with a first-time flipper, but to mitigate their risk they might offer loan terms that include a larger down payment, higher interest rate, and more points.
- What is your financial standing and credit history?
Hard money loans are usually based more on the value of the asset than on the borrower’s credit history, however, you will want to ask your lender if there is a minimum acceptable credit score and whether a recent bankruptcy or foreclosure could disqualify you.
Every lender is different, and fix-and-flip lenders are generally more flexible than conventional banks, so don’t count yourself out until you’ve spoken to your lender about the programs they have available for borrowers with credit challenges.
Conversely, borrowers with good credit may find fix-and-flip lenders willing to offer discounted rates and points, or they may accept a lower down payment. Typically, a hard money lender will expect a qualified borrower to contribute at least 20% of the cost of purchasing a fix-and-flip property, but case-by-case exceptions are made, so be sure to ask your lender how much cash you should expect to bring to the deal.
How to Get Approved for a Fix-and-Flip Loan with Western Pacific Home Loans
- Your subject property must be located in one of the 31 states in which we operate, and cannot be situated in a high crime area, or in a rural community below 50k population.
- WPHL's valuation team must determine that there is sufficient ARV in your deal to warrant loan approval.
- WPHL's preferred borrower has at least one fix-and-flip project under their belt, but we also work with the less experienced investor.
- Loan applicants should expect to contribute 15% of acquisition costs to be approved for financing. This amount is sometimes lower for high-volume borrowers—on a case-by-case basis.
- Although perfect credit isn’t a make-or-break factor in our loans, it certainly doesn’t hurt. Borrowers with good-to-excellent credit should talk with a Loan Officer to find out how they can benefit from their higher score.
If you’re ready for your next fix-and-flip project and think you may be a good fit with Western Pacific Home Loans, we’d love to hear from you. Learn more about what we’re looking for from our fix-and-flip borrowers and contact us when you’re ready to get started.
Our fast, flexible, and transparent lending process can help you meet your funding needs on your fix-and-flip project right away.