The Quick Read: A hard money loan to flip houses is a short-term, business-purpose loan underwritten against the deal itself — the purchase price, the rehab budget, and the projected after-repair value — rather than your paycheck or your traditional personal-income documentation. Most programs cap purchase leverage around 85% loan-to-value and finance up to 100% of the rehab budget separately, then release renovation money in draws as work gets inspected and completed. Terms run short, commonly 6 to 12 months, which is why the exit plan matters as much as the purchase price.
The Short Version
- Underwriting centers on the property and the plan, not your income documents.
- Leverage tops out around 85% LTV on most purchase files, with rehab costs financed on top of that, up to 100% of the rehab budget itself.
- Renovation funds aren’t handed over at closing. They release in draws, tied to inspected, completed work.
- These are bridge loans — think 6 to 12 months on a standard file, longer on select 2, 3, or 5-year structures — not 30-year mortgages.
- A finished flip doesn’t have to sell. Plenty of investors refinance into long-term rental financing instead.
What a Hard Money Loan for Flipping Actually Is
Forget the name for a second — “hard money” is really just business-purpose bridge financing secured by real estate. It goes to an investor or an LLC buying a property to renovate and sell (or sometimes hold), not to a family buying a home to live in. Because it funds a commercial transaction rather than a personal residence, it gets reviewed under different rules than a standard owner-occupied mortgage, and it moves through a different underwriting lane entirely.
That distinction is why the loan can look at things a conventional bank simply won’t. Appraisers value the property based on its after-repair value (ARV) — what it will be worth once the rehab is done — not just its current, as-is condition. That single difference explains most of what feels unfamiliar about this loan type to a first-time flipper. For a broader look at how lenders structure these deals, Lendmire’s guide to hard money for fix-and-flip investors walks through lender selection in more depth.
Key Terms Defined
Hard money loan (private money loan): a short-term, business-purpose loan secured by real estate, underwritten primarily against the property and the deal rather than the borrower’s income.
ARV (after-repair value): the projected market value of the property once renovations are complete — the number that drives how much a flip loan will lend.
LTV (loan-to-value): the loan amount as a percentage of the property’s current value, used to size the purchase portion of the loan.
LTC (loan-to-cost): the loan amount as a percentage of total project cost — purchase price plus rehab budget — used to check how much skin the investor has in the deal.
Draw schedule: the release of rehab funds in stages, tied to completed and inspected work, rather than a single disbursement at closing.
Seasoning: the length of time a lender wants an investor to hold a property before refinancing it, especially before pulling cash out.
DSCR (debt-service coverage ratio): a measure of whether a property’s rent covers its full monthly housing payment — the metric that drives long-term rental refinancing once a flip becomes a hold.
How the Underwriting Actually Works, Step by Step
Fix-and-flip underwriting runs on four moving parts, and understanding the order matters more than most first-timers expect.
Step one: the property gets valued twice. An appraiser or a broker price opinion establishes current, as-is value, and a second number — the ARV — gets built from comparable renovated sales nearby. The gap between those two numbers, minus the rehab cost, is the margin the whole deal depends on.
Step two: leverage gets measured against more than one base. A conventional mortgage quotes a single LTV. A flip loan typically layers two or three ratios at once — LTV against current value on the purchase side, and a separate cap against total project cost or ARV on the rehab side. Across the wholesale lending network Lendmire places files through, purchase leverage on fix-and-flip deals generally runs up to around 85% loan-to-value for stronger, more experienced borrowers, with rehab costs financed separately — up to 100% of the rehab budget itself. That last point trips people up constantly: 100% of the rehab budget is not the same thing as 100% purchase financing, and there’s no program in this space that hands an investor the full purchase price with zero money down.
Step three: rehab money doesn’t move on a calendar, it moves on milestones. Funds sit in reserve until a draw request comes in, usually backed by photos or an inspection confirming the work matches what’s being billed. This protects the lender from overfunding a project that stalls, and it protects the investor’s carrying costs too — interest generally only accrues on money actually disbursed, not the full rehab reserve sitting untouched.
Step four: the file gets decided on the deal, not a resume. Credit still matters, but minimums vary meaningfully by program — some corners of the market carry no fixed floor, others want a track record on file. What actually derails a first-time flipper’s application is rarely credit. It’s usually one of three things: not enough cash for the down payment and reserves, a rehab budget that doesn’t leave enough margin against the ARV cap, or a purchase price and repair scope that push the total loan past what the ARV supports.
The Structures: Loan Sizes, Terms, and What Actually Gets Financed
Loan sizes across this space run wide — roughly $100,000 up to $60 million on the institutional end, with most single-property flips sitting well below the top of that range. Terms are structured as short bridge loans, commonly 6 to 12 months, built around the assumption that the property sells or gets refinanced before the note matures. Select programs stretch into 2-year, 3-year, or 5-year structures for investors who want more runway, and interest-only payment structures are common across the space, which keeps monthly carrying costs lighter while the rehab is underway.
Collateral isn’t limited to single-family houses, either. Residential investment property, small multifamily, commercial, industrial, and even land or ground-up construction can all sit behind this kind of financing, depending on the lender and the file. Underwriting stays asset-based across all of it: property value, equity position, and exit plan carry the file, with credit and experience layered on top rather than driving the decision outright.
One honest caveat worth sitting with: every one of these numbers varies by lender, by property type, and by the borrower’s experience level. Nothing here is a commitment to lend, and the file that clears one lender’s guidelines might not clear another’s.
Where the Rehab Budget Fits (and Why 100% Financing Isn’t Real)
New investors almost always ask for full financing on both the purchase and the rehab — and it’s a reasonable question, since the marketing around “no money down” flipping never quite goes away. Here’s the actual structure: purchase leverage tops out around 85% LTV for the strongest borrowers, and the rehab budget can be financed up to 100% on top of that, subject to the total loan still fitting inside the lender’s ARV cap. That’s a meaningfully different thing than a lender covering 100% of the purchase price.
The reason is simple risk math. A lender financing the entire purchase has zero cushion if the investor walks away mid-project or the market softens before the sale. Requiring equity in the purchase — even a modest slice — keeps the investor’s incentives aligned with finishing the job and selling for the projected value. Investors comparing options across lenders should look closely at what qualifies as hard money versus other private-capital structures, since terminology in this space gets used loosely.
Where the General Rule Breaks
Most of what governs a flip loan is mechanical — ARV, leverage, draws. But three edge cases catch experienced investors off guard, and none of them live inside the loan itself.
The FHA 90-Day Rule Hits Your Buyer, Not Your Loan
This is the single most misunderstood rule in flipping, and it has nothing to do with the hard money loan an investor takes out. It governs whether the eventual buyer can use FHA financing to purchase the flipped property. Under HUD’s property-flipping rule, FHA insurance generally can’t be issued if the buyer’s purchase contract is signed too soon after the investor’s own acquisition date, and HUD requires extra documentation of the increased value for resales that fall within a later window if the resale price runs well above the original purchase price (Federal Register). HUD has been explicit that the rule was never meant to stop legitimate investors from profiting — it was built to keep buyers from overpaying for overvalued flips (HUD). The practical takeaway: price a flip’s marketing timeline with an eye on who the likely buyer pool is, especially in price ranges where FHA buyers are common.
An LLC Doesn’t Automatically Exempt the Deal
Putting a flip in an LLC is standard practice, and it does help route the loan into business-purpose underwriting — the mechanism that lets hard money lenders skip the disclosure timelines built for consumer mortgages. But exemption depends on loan purpose and, in some scenarios, on unit count, not on entity name alone. Regulation Z’s own commentary draws a line for owner-occupied rental situations specifically: financing to acquire a rental property is treated as business-purpose once it involves more than two housing units, while financing to improve or maintain one is treated as business-purpose once it involves more than four units (Compliance Alliance). A pure investment-property flip in an LLC almost always clears this cleanly. A live-in flip or a small owner-occupied multi-unit deal is where investors should double-check which side of that line they’re on.
The IRS Doesn’t Care How Long You Held It
A common assumption is that holding a flip for more than a year converts the profit into capital gains. It doesn’t work that way — the IRS and courts weigh frequency of sales, the extent of renovations, and intent, with no single bright-line time test deciding the outcome (Cummings & Cummings Law). Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and talk to a qualified tax professional before relying on any assumption about deductions or gain treatment.
Sell, Hold, or Refinance: The Decision Investors Actually Face
Every flip loan eventually forces a choice: sell before the note matures, extend, or refinance into something longer-term. National flip margins have been compressing at the same time carrying costs have gotten more expensive to ignore. ATTOM’s most recent flipping data shows typical gross profit on a flip running around $66,000, with margins near 25.4% — both figures trailing where they stood a year earlier (ATTOM Data Solutions). That compression is exactly why the financing structure — leverage, term length, and draw efficiency — can be the difference between a profitable flip and a break-even one.
Here’s how the three common paths stack up structurally. Note that the leverage figures below apply to different transaction types — the hard money figure reflects purchase leverage on a flip, while the DSCR figure reflects the separate, lower cap that applies specifically to cash-out refinances:
| Factor | Hard Money | DSCR Refinance | Conventional |
|---|---|---|---|
| Underwriting basis | Deal and property, not personal income | Property’s rental income | Borrower income and debt-to-income |
| Value used | After-repair value (ARV) | As-is value plus market rent | As-is appraised value |
| Typical leverage | Up to ~85% LTV on the purchase, plus separate rehab budget financing | Up to ~75% LTV specifically on cash-out; rate-and-term refinances can differ | Varies by program and occupancy |
| Term structure | Short bridge, commonly 6-12 months | 30-year fixed, common | 30-year fixed, common |
| Best fit | Buy, renovate, sell on a timeline | Hold long-term as a rental | Owner-occupied purchase |
A flip that stalls mid-renovation, or one where the numbers just work better as a rental once the work is done, doesn’t have to end in a forced sale. Refinancing a completed rehab into a long-term rental loan is a well-worn path — the strategy investors often call BRRRR. Rate-and-term refinances (paying off the flip loan without pulling cash out) generally season faster than cash-out refinances, which is why investors who decide mid-project to hold rather than sell often try to structure the exit that way first. Cash-out refinancing on the rental side typically tops out around 75% LTV, with roughly six months of seasoning being the common expectation across the wholesale network Lendmire works with, and coverage ratios starting around 1.00 as a select-program floor rather than a universal rule — stronger ratios generally open better leverage and terms. Lendmire’s complete DSCR loans guide breaks down how that qualification actually works, and its guide to refinancing a hard money loan after a BRRRR project walks through the pivot in more detail.
This is genuinely where a lot of files sit in a gray zone — the flip loan is maturing, the market softened a little, and the investor has to decide fast whether to drop the price, extend the bridge loan, or refinance and become a landlord instead. There’s no universally right answer; it depends on the rent the property can command against its full monthly obligation, and whether that clears comfortably or just barely.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
Frequently Asked Questions
Can I get a hard money loan to flip a house with bad credit?
Credit minimums vary widely across the space, and some programs don’t carry a fixed floor at all — the deal itself usually carries more weight than the score. That doesn’t mean credit is irrelevant; it affects pricing and leverage tier, and a thin credit file often means a lender wants more cash in the deal or more experience on the file to compensate. Qualification always depends on the specific lender’s guidelines.
How much down payment do I need for a hard money loan flip house deal?
Most files land with meaningful investor equity in the purchase, since leverage generally tops out around 85% LTV for stronger borrowers. The rehab budget is financed separately, up to 100% of the rehab costs themselves, so the down payment conversation is really two conversations — one about the purchase and one about the rehab — not a single blended number.
How do you qualify for a hard money loan to flip a house?
Qualification generally centers on the deal itself — the as-is value, the rehab budget, and the projected after-repair value — rather than pay stubs or traditional personal-income documentation. Lenders also weigh the investor’s cash position, reserves, and track record, but the property and the plan typically carry more weight in the decision than any single personal financial metric.
What happens if my flip doesn’t sell before the loan matures?
Bridge terms commonly run 6 to 12 months, and if a sale isn’t ready by maturity, investors typically either negotiate an extension, refinance into a longer-term loan, or, if the numbers work better as a rental, move into DSCR financing instead of forcing a sale. Planning the exit before the renovation is even finished avoids getting boxed into a decision under pressure.
Does the FHA 90-day flip rule stop me from getting a hard money loan?
No — that rule affects whether your eventual buyer can use FHA financing to purchase the property from you, not whether you can get financing to buy and renovate it yourself. It’s a resale-side restriction tied to the buyer’s loan type, not an investor-side qualification hurdle.
Can I do multiple flips at once with hard money financing?
Many active investors run several projects simultaneously, and lenders generally evaluate each property and each deal on its own merits rather than capping an investor at one file. Reserves, experience, and overall exposure across open projects do factor into how a lender views a new request, so a portfolio of active flips gets underwritten with that full picture in mind.
Program availability, loan terms, and eligibility are subject to lender guidelines, credit approval, property review, and full underwriting. This article is educational and is not a loan offer or commitment to lend.
Many investors treat hard money as the acquisition tool and plan the exit up front – see refinancing out of a hard money loan with a DSCR loan.
About Lendmire
Lendmire (NMLS# 2371349) is a multi-state mortgage brokerage that arranges both hard money and DSCR investor financing through a wholesale network of lenders spanning 40 markets, including Washington, D.C. Every scenario described here is general information, not a commitment to lend — actual leverage, terms, and eligibility depend on the lender, the property, the borrower’s experience, and current program guidelines, all subject to lender approval. Loans made to LLCs or other entities are subject to program terms, and review details are subject to lender overlays. None of this is financial, legal, or tax advice. Investors weighing a specific deal can call 828-256-2183 or request a quote directly to see how a particular property and rehab scope actually pencil out. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
References
1. Federal Register — HUD Prohibition of Property Flipping in Single-Family Mortgage Insurance Programs
2. HUD — What HUD Is Doing About Property Flipping
3. Compliance Alliance — Regulation Z and Investment Properties
4. Cummings & Cummings Law — Understanding Tax Implications of Real Estate Flipping
5. ATTOM Data Solutions — Q1 2026 Home Flipping Report
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.
