The Quick Read: A hard money lender sizes a flip loan by running two tests on the deal, a percentage of project cost and a cap on after-repair value, then lending whichever result is lower. Rehab money is held back and released in draws as inspected work is finished. Your income is not the main driver. The property, the plan, and your track record are.
- The loan is the lower of a loan-to-cost result and a cap on after-repair value (ARV).
- In the Lendmire network, leverage is tiered by experience: 85% of project cost with fewer than 2 completed projects, 90% at 2 or more, and 93% at 5 or more. Every tier is capped at 75% of ARV.
- Up to 100% of a documented rehab budget funds in draws against completed work, not at closing.
- Your cash at closing is the purchase price minus the first advance, plus closing costs. You then front rehab costs until each draw is reimbursed.
- All figures vary by lender, property, and experience, and nothing here is a commitment to lend.
Most first-time flippers ask what percentage the lender will lend. The better question is which test binds on this particular house. Investors who run both tests before they make an offer rarely get surprised at the appraisal.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Key Terms Defined
After-repair value (ARV): what the finished house should sell for, based on comparable renovated sales. It is not purchase price plus rehab spend.
As-is value: what the house is worth today, in its current condition.
Project cost: the purchase price plus the documented rehab budget.
Loan-to-cost (LTC): the loan as a share of project cost.
Loan-to-ARV (LTARV): the total loan as a share of ARV. Lenders use it as a ceiling.
Holdback: the rehab portion of the loan, kept aside at closing and released later.
Draw: a release of holdback money after an inspector confirms that work is complete.
What Does a Flip Lender Actually Look At?
A flip lender underwrites the deal, not your paycheck. It weighs the ARV and the comparable sales behind it, the purchase price against that ARV, the realism of your scope and budget, your experience tier, your credit, and your cash for the down payment, closing costs, and reserves.
Hard money loans are short-term and secured by the property. The Lendmire network works on non-owner-occupied residential property, one to four units. This article covers the single-family case.
The terms are short and interest-only. Typical terms run 6 to 18 months, with no prepayment penalty. Loans go up to $5,000,000, and larger by exception. Credit minimums sit around 620, with added conditions below 660. Those ranges vary by lender, property, and experience.
Underwriting stays asset-based, but that does not mean the borrower is ignored. Experience, credit, liquidity, and a credible budget still set your tier and conditions.
How Is the Loan Amount Calculated, Step by Step?
The lender verifies ARV, runs the cost test, runs the ARV cap, takes the lower result, splits it into closing funds and holdback, and then works out the cash you owe. The order matters, because a high ARV does nothing for you if the cost test binds first.
1. Submit the deal. You send the address, purchase contract, scope of work, line-item budget, your ARV estimate with comps, and entity and ID documents.
2. Run the cost test. Apply your tier percentage to project cost.
3. Run the ARV cap. Multiply ARV by 75%. No tier gets past it.
4. Take the lower number. That is your maximum loan.
5. Split the loan. The first advance funds the purchase. The rehab portion becomes a holdback.
6. Calculate your cash. Your total cash commitment is project cost minus the total loan, plus closing costs. At closing you pay the purchase price minus the first advance, and you front rehab costs until draws reimburse you.
A Worked Example on One Single-Family House
On this modeled deal, the cost test governs and the loan is $270,000. The inputs are illustrative assumptions, not market data: a purchase of $220,000, a rehab budget of $80,000, and an ARV of $420,000. The investor sits in the 90% tier, with 2 or more completed projects.
| Step | Calculation | Result |
|---|---|---|
| Project cost | $220,000 + $80,000 | $300,000 |
| Cost test | 90% of project cost | $270,000 |
| ARV cap | 75% of $420,000 | $315,000 |
| Governing test | Lower of the two | Cost test |
| Your total cash | $300,000 − $270,000 | $30,000 plus closing costs |
The cap leaves $45,000 of room above the cost result. That room does nothing for you here, because the lender does not lend up to the cap just because it can.
When Does the ARV Cap Bind Instead of the Cost Test?
The cap binds when project cost is a large share of ARV. At the 90% tier, the cost test governs only when ARV is at least 1.2 times project cost, because 90% divided by 75% is 1.2. Below that multiple, the 75% cap takes over, and experience stops helping.
| Factor | Deal A (the example above) | Deal B (thin margin) |
|---|---|---|
| ARV as a multiple of project cost | 1.4x | About 1.18x |
| Cost test (90% tier) | 90% of project cost | 90% of project cost |
| ARV cap result | Above the cost result | Below the cost result |
| Governing test | Cost test | ARV cap |
| Loan vs. project cost | 90% | About 88% |
The tier says 90%, but on Deal B the cap pulls the loan to roughly 88% of cost, and you fund the difference. This is why a thin deal can look fully financed on paper and still need more cash than you expected. The same logic applies at other tiers. The 85% tier needs ARV above roughly 1.13 times project cost, and the 93% tier needs about 1.24 times.
The cap also bites on a very cheap purchase with a large rehab. The cap is a percentage of ARV, not of what you paid, so a low price does not shield you.
What If the Lender’s ARV Comes In Lower Than Yours?
If the appraisal comes in lower, the 75% cap falls with it, and your cash to close rises. Your own ARV is an estimate. The appraiser sets the number the lender uses.
Take the worked example. Its ARV is 1.4 times project cost, and the cost test governs until ARV falls to 1.2 times cost. That is a drop of roughly 14%. Past that point, every dollar of ARV you lose cuts the loan by 75 cents, and you cover it from your own cash. Strong comps, a clean scope, and a purchase price with real margin protect you from this.
Build in a cushion before you submit. If your deal only works at your own optimistic ARV, it does not work yet.
How Does the Rehab Money Actually Reach You?
You do not get rehab money at closing. It stays in holdback, and you request a draw as work finishes. An inspector verifies completion, then funds release. Up to 100% of a documented rehab budget can fund this way on the Lendmire network, though the exact structure varies by lender.
This affects your cash timing. You typically front early costs and get reimbursed after inspection, so your liquidity has to cover the gap between spending and reimbursement. The number of draws and the amount of each are agreed in advance. Some lenders release by line item, and others by overall percent complete.
A detailed, line-item budget with a contingency line helps here. Vague budgets get questioned, and rehab-heavy or structurally compromised houses draw closer review.
How Does Your Experience Level Change the Number?
Experience raises the share of project cost the lender will fund, because a completed track record lowers the lender’s execution risk. It never lifts the ARV cap. The tiers below are typical for the network and vary by lender, property, and experience.
| Completed projects | Leverage on project cost | ARV cap |
|---|---|---|
| Fewer than 2 | 85% | 75% |
| 2 or more | 90% | 75% |
| 5 or more | 93% | 75% |
First-timers should expect the lowest tier. There is no true 100% purchase program in this network. Claims of 100% financing usually describe a structure where the lender funds the whole purchase and rehab, but the total loan is still capped at a share of ARV. Only a deeply discounted deal fits under that cap.
Other structures run on different tiers. A bridge purchase with no rehab runs up to 80% of purchase price. A cash-out or rate-and-term refinance runs up to 65% of value.
Is the 70% Rule the Same Thing as Lender Sizing?
No. The 70% rule is a purchase screen for you, and the lender’s loan cap is a separate test. Bankrate defines the 70% rule as paying no more than 70% of ARV minus repair costs. The remaining margin covers closing costs, carry, and profit.
The rule tells you what to pay. It does not tell you what a lender will lend. It is also a rule of thumb, not a guarantee, and it says nothing about whether the later refinance will work. Use it to screen offers, then run the lender’s two tests on the same numbers.
Run Your Own Sizing Before You Call
A five-minute worksheet catches most bad deals before a lender does. Work through these in order:
1. Write down purchase price, rehab budget, and a conservative ARV supported by renovated comps.
2. Add the first two for project cost, and apply your tier percentage.
3. Multiply ARV by 75%.
4. Take the lower number as your likely loan.
5. Subtract the loan from project cost to see your total cash, then add closing costs and a liquidity buffer for draws.
6. Re-run it with ARV 10% lower. If the deal breaks, the margin is too thin.
Where the General Rule Breaks
The two-test rule holds on most single-family flips, but several situations bend it.
- Heavy rehabs. Houses with large structural work draw more scrutiny. Bank financing generally does not cover heavy repairs. The FHA 203(k) is a different product entirely, where HUD describes repair funds held in escrow and released when work is completed, under HUD-defined limits and time frames.
- Thin or weak comps. If renovated sales nearby are scarce, lenders discount ARV, and the practical result is a lower purchase multiple.
- Loose LTV language. In ordinary hard money talk, LTV refers to current value. On a flip, the cap references future value, so the same word means different things. Ask which value a lender means.
- Interest on undrawn funds. Some lenders charge interest on the full loan from day one, and others only on funds already drawn. That changes your carry cost but not the sizing math, and it varies by lender.
- Cross-collateral. Some programs allow extra collateral or additional down payment in place of a thin margin. Availability varies.
What Happens at the End of the Loan?
You repay from a sale or a refinance. Many investors who keep the house refinance into long-term rental financing once it is stabilized, and Lendmire brokers that path. The complete DSCR loans guide explains how rental loans are underwritten.
Here is where sizing and exit collide. A standard rental cash-out refinance generally tops out around 75% of appraised value, with about 6 months of seasoning as the common expectation. If your bridge loan sits at the 75% ARV cap, the new loan can only pay it off if the appraisal hits your projected ARV exactly. That leaves nothing for closing costs.
Take a project where all-in cost is 72% of projected ARV. The appraisal must come in at 96% of your projection just to break even before costs. A bridge sized to the cap leaves no room for that miss. Size it with the exit in mind.
Frequently Asked Questions
Does a hard money lender lend a percentage of my purchase price?
No. The lender applies a tier percentage to project cost, the purchase price plus the rehab budget. It then caps the total at a share of ARV. The loan is whichever result is lower, so the purchase price alone is never the base.
What credit score do I need for a flip loan?
The Lendmire network generally works from a 620 minimum, with added conditions below 660. First-time investors can qualify at the lower leverage tiers. Underwriting is still asset-based, so the property, plan, and exit matter alongside credit, and every file is reviewed individually.
Will the lender accept my ARV estimate?
Not on its own. An independent appraisal usually sets ARV from renovated comparable sales, and a lower appraised ARV reduces the loan. Bring comps that match the finished house’s size, condition, and location.
Can I get 100% of the rehab budget at closing?
No. Up to 100% of a documented rehab budget can be funded, but in draws released against inspected, completed work. At closing, the first advance covers the purchase and the rest sits in holdback.
Does experience raise the ARV cap?
No. Experience raises the share of project cost the lender funds, from 85% to 90% to 93% in the network’s tiers. Every tier stays capped at 75% of ARV.
Next Steps
If you are buying, rehabbing, or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire is a mortgage broker arranging financing through select lenders across 41 markets, including Washington, D.C. You can reach the team at 828-256-2183.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
The exit plan matters as much as the purchase price on short-term financing. Lendmire’s piece Should You Use a Hard Money Lender for a Single Family Investment Home? covers that tradeoff.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Bankrate: The 70% Rule in House Flipping
2. HUD: Single Family Mortgage Programs, 203(k)
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money Flip Loan Documentation for an Online Approval · Hard Money Loan Options and Requirements for a House Flip · Can You Get a Hard Money Flip Loan Approved Online?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.