The Quick Read: Usually, yes: a first-time investor can often finance up to 100% of the rehab budget on a hard money flip loan, but the money arrives as reimbursement-style draws after each phase of work is finished and inspected, and the total loan is capped at a share of after-repair value.
- Rehab money is held back and released in draws. It is not a check at closing.
- First-timers sit in the lowest leverage tier, so expect to bring more cash than an experienced flipper.
- Every tier is capped at 75% of after-repair value, no matter how generous the cost percentage looks.
- You usually front the cost of each phase first, then get reimbursed.
- Terms, caps and fees vary by lender, property, and experience, and nothing here is a commitment to lend.
How the Loan Splits in Two
A hard money flip loan has two buckets. The first buys the property and funds at closing. The second is the rehab holdback, which a third party holds and releases as work gets done.
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.
Hard money is short-term, asset-secured financing from private lenders.
That is why a first-timer can get in the door. The lender reviews the property, the plan, and the exit. Credit, liquidity, and experience still shape your terms. They just don’t decide whether you get a hearing.
Lendmire is a mortgage broker. It arranges hard money and DSCR investor loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. The lenders review and approve. The structure below reflects what the network typically offers, and it changes with the file.
What “Borrowing Rehab Costs” Really Means
The headline sounds simple: the lender finances 100% of your rehab. Here is what that sentence leaves out.
On the programs Lendmire places files with, up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure. It is not a purchase loan-to-value number, and there is no true 100% purchase program. You bring cash toward the purchase.
Then the second cap arrives. Leverage is measured against project cost (purchase plus rehab) and also against after-repair value. The lower of the two controls.
The two caps, in plain English
Loan-to-cost compares the loan to what the whole project costs you. After-repair value, or ARV, is the estimated worth of the home once the work is done, usually built from comparable sales, as BiggerPockets explains.
For first-timers, the network’s tiers run like this, always varying by lender, property, and experience:
| Experience | Leverage on project cost | Overall cap |
|---|---|---|
| Fewer than 2 completed projects | 85% | 75% of ARV |
| 2+ completed projects | 90% | 75% of ARV |
| 5+ completed projects | 93% | 75% of ARV |
You start in the first row. That is not a punishment. It is how lenders price the risk of an untested builder.
Where First-Timers Sit (and Why)
A first flip is the riskiest kind for a lender. Budgets run over. Contractors stall. Renovation timelines slip. Lenders know a new investor hasn’t lived through that yet.
So the lender trims leverage instead of closing the door. The credit floor across the network’s hard money programs is 620, with added conditions below 660. First-time investors qualify at the lower leverage tiers. Experienced investors get the top ones.
What moves you up? Completed projects. Two finished flips move you to the middle tier. Five move you to the top. An experienced partner on the deal can also help a new investor qualify, depending on how the lender treats partner experience.
A few things are not offered here. The network lends on non-owner-occupied residential property, one to four units. It does not lend on owner-occupied homes, land, or commercial buildings.
The Worked Example: When the ARV Cap Matters
Run the numbers on two modeled flips. These are assumptions, not market data. Both use the first-timer tier at 85% of project cost, and both express everything as a share of ARV, so no dollar math is needed.
| Scenario | Project cost vs. ARV | 85% of cost | Cap applied | Your cash |
|---|---|---|---|---|
| A: strong margin | 70% of ARV | 59.5% of ARV | 59.5% (under cap) | 10.5% of ARV |
| B: moderate margin | 75% of ARV | 63.75% of ARV | 63.75% (under cap) | 11.25% of ARV |
In both rows the cost percentage controls, because the loan lands under the 75% ARV cap. Notice what happens as margin shrinks: your cash share grows.
The cap itself starts to bite only when project cost climbs close to the after-repair value. At that point 85% of cost would exceed 75% of ARV, the cap wins, and you fund the difference. Those are thin deals, and lenders tend to look hard at them for other reasons too.
That is the “100% rehab” trap. The label does not override the cap. A thin deal shrinks your loan even if the rehab line says 100%.
Two more cash items sit on top of both rows. Closing costs, insurance, and the interest reserve come out of your pocket. So does the first phase of construction, which brings us to timing.
Your Draw Timeline (and the Cash Gap)
Draws work in a loop. You should know it cold before you sign anything.
1. The contractor finishes a phase of work.
2. You (or the contractor) submit a draw request with invoices.
3. A third-party inspector visits and confirms the work.
4. The inspector reports to the lender.
5. The lender releases the draw, sometimes partially if the work is partly done.
Notice who pays first. You do. Advertised “100% rehab financing” is technically true, but the first phase comes out of your liquidity, and reimbursement follows inspection. Experienced investors sometimes negotiate advanced draws. First-timers rarely do.
Many contractors want a deposit. Others want to be paid weekly. Neither fits neatly into a reimbursement loop, so negotiate payment terms before work starts. Build the gap into your cash plan.
Per-draw inspection and wire fees are common. Interest on the holdback varies too. Some lenders charge interest on the full balance from closing. Others charge only on funds disbursed. Ask which one yours is, because it changes your carry cost.
Terms on these loans run 6 to 18 months, interest-only, with no prepayment penalty. The clock is short, so slow draws cost real money.
What Lenders Need to Approve Your Rehab Budget
Lenders don’t fund a vibe. They fund a documented plan. Expect to submit:
- The purchase contract.
- A scope of work with line-item costs.
- Contractor bids or a contractor’s budget.
- Comparable sales supporting your ARV.
- Entity documents if you buy through an LLC, subject to lender program eligibility.
- Proof of cash for down payment, closing costs, and the first-phase float.
- Your experience, or your partner’s.
Budget quality decides how much of your plan survives. A one-line “kitchen: lots” gets trimmed. A line-item scope with bids gets taken seriously. Add a contingency line, too. Many investors budget 5% to 10% of rehab for surprises, and a first-timer should lean high.
Here’s a pattern worth knowing. Budgets get cut when the scope looks bigger than the purchase price can support, or when the ARV leans on a single generous comp. Files that bring three solid comps and a contractor-signed scope tend to move through lender review with fewer revisions. Compare how a few lenders treat your numbers.
When Rehab Runs Over (or the Sale Runs Long)
The holdback does not grow because your costs did. If you find rotted subfloor in week three, the extra money comes from you.
Worse, repairs discovered after the scope was submitted may not be credited by the inspector. Your next draw can come in short. A contingency line item and early talks with the lender about scope changes are the fix.
Cash reserves matter here more than anywhere else. Lenders want to see liquidity left after closing, because interest-only payments and the early rehab all draw on it. Skip the thin-cash flip. It’s the usual way first deals go sideways.
If the sale drags, you carry interest-only payments for longer. The term is 6 to 18 months, and extensions depend on the lender. Many investors plan a second exit before they start: refinance out of hard money into long-term rental financing once the property is stable and leased. Lendmire brokers that route through DSCR loans, which check whether the rent covers the full monthly payment (principal, interest, taxes, insurance, and any HOA dues). Clearing the minimum coverage is not the same as positive cash flow, because repairs, vacancy, and management sit outside the calculation. Lendmire’s complete DSCR loans guide covers that exit in detail.
Other Ways to Fund Rehab
Hard money is not the only option. It is the most flexible one for an investor who isn’t living in the house.
| Option | Fit for a first-time flipper |
|---|---|
| Hard money flip loan | Built for flips; short term, draw-based |
| FHA 203(k) | Built for owner-occupants, not flips |
| Conventional renovation loan | Typically needs an occupant borrower, slow to adapt |
| Cash or partner capital | No draw rules, but ties up your money |
FHA’s 203(k) program also holds rehab funds in escrow and releases them as work is completed. The mechanics look familiar. But it is designed around a borrower who will live in the home, so it rarely suits a pure flip.
Gap or second-lien funding exists in some corners of the market. A first-timer shouldn’t count on it. Plan to cover the gap with your own cash or a partner.
Key Terms Defined
Hard money loan: short-term, asset-secured financing from a private lender, with the property as the main underwriting focus.
Loan-to-cost (LTC): the loan as a percentage of what the project costs, purchase plus rehab.
After-repair value (ARV): the estimated market value of the home after renovation, based on comparable sales.
Holdback: rehab money the lender keeps in reserve and releases as work is completed.
Draw: one release of holdback funds after a phase of work passes inspection.
Interest reserve: cash set aside to cover interest-only payments while the project is underway.
Can You Borrow Rehab Costs? A Five-Point Test
Run your first flip through these before you apply:
1. Does project cost land well under 75% of ARV? Thin margins shrink your loan.
2. Do you have cash for your share of the purchase, closing costs, and insurance?
3. Can you float the first construction phase and still pay interest?
4. Do you have a line-item budget with contractor bids and a contingency?
5. Do you have a second exit, such as a refinance into rental financing, if the sale drags?
Four yeses and a plan: you are in decent shape. Two or fewer: wait, partner up, or shrink the project.
Frequently Asked Questions
Can I get 100% of the rehab as a first-timer?
Often, yes, up to 100% of the rehab budget can fund in draws, depending on the lender. That figure applies to the rehab line only. Your total loan is still limited by project-cost leverage (85% for fewer than two completed projects) and by the 75% ARV cap. Terms vary by lender, property, and experience.
Do I pay interest on money I haven’t drawn?
It depends on the loan. Some lenders charge interest on the full loan balance from closing, while others charge only on funds already disbursed. Get the answer in writing before you sign, since it changes your carry cost across a 6-to-18-month term.
What if the lender cuts my rehab budget?
That usually means the scope looked inflated or the ARV support was thin. Respond with line-item contractor bids and stronger comparable sales. You can also shrink the scope, add cash, or bring in a partner with flipping experience.
Do I need an LLC?
Many investors buy through an LLC, subject to lender program eligibility, and the lender will want entity documents if you do. These are business-purpose loans on non-owner-occupied one-to-four-unit property, so the structure should fit an investment.
Can a first-timer qualify with a 620 score?
A 620 is the minimum score in the network’s hard money programs, with additional conditions below 660. Higher scores tend to help. Underwriting stays centered on the property, the plan, and the exit.
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. Call 828-256-2183.
To see how loan size limits apply to a first flip, read Lendmire’s piece Hard Money Fix-and-Flip Loan Limits for a First-Time Investor.
A first flip rewards the investor who treats the ARV cap and the first-draw float as fixed costs of entry, because those two numbers decide how much of your own cash the deal truly needs.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
1. BiggerPockets: After Repair Value (ARV)
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Bridge Loan vs Hard Money for a First-Time Investor: The Exit Plan · How to Meet Hard Money Requirements on Your First Fix-and-Flip · National vs Local Hard Money Lender for a Fix-and-Flip Investor
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.