The Quick Read: Usually, but in two pieces rather than one lump sum: the purchase portion funds at closing, while the rehab budget sits in a lender-held holdback and is released in draws as completed work is inspected, so you still bring a cash down payment, closing costs, and enough liquidity to front each phase before reimbursement. No program funds 100% of the purchase price. The loan is also capped against the home’s projected after-repair value.
- Purchase money funds at closing. Rehab money comes later, in draws against finished work.
- Leverage runs on project cost (purchase plus rehab), tiered by how many projects you have completed, and it is capped by after-repair value.
- You front each phase of work, then get reimbursed after inspection.
- Closing costs, interest carry, and overruns usually sit outside the loan.
How Does One Loan Fund Both the Purchase and the Rehab?
A flip loan has two buckets. The purchase bucket is funded when you close. The rehab bucket is funded as you finish work. Both sit under one note, but they do not reach you at the same time.
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.
Here is how it plays out at the closing table. The title company handles the funding. The lender holds back most or all of the renovation budget, and the settlement statement shows that money held for the work. Some lenders release a small increment at closing, but you should not count on it. This holdback-then-draw structure is the standard flip-loan pattern, as Yieldstack’s fix-and-flip draw schedule explainer lays out.
Why do lenders do it this way? Because the rehab money buys value that does not exist yet. The lender protects itself by paying for work that is already done.
Hard money is a business-purpose, asset-based loan on non-owner-occupied property. The lender sizes it on the project: the purchase price, the rehab budget, and the projected after-repair value. Your income is not the main driver. Owner-occupant renovation loans are a different product, and they do not apply to an investor flip you will not live in.
Key Terms Defined
Hard money loan: a short-term, interest-only, asset-based loan for investors, sized on the project rather than on your paycheck.
Project cost: the purchase price plus the rehab budget. Lenders on a flip size leverage against this number.
After-repair value (ARV): what the home should be worth once the work is finished, supported by comparable sales.
Holdback: the part of the loan the lender keeps and releases in stages instead of handing you at closing.
Draw: one release of holdback money, requested after you finish and pay for a phase of work.
DSCR (debt service coverage ratio): monthly rent divided by the full monthly payment on a rental loan. It matters here because many flippers exit into one.
What Does “Covering” the Flip Actually Mean?
Covering does not mean you bring nothing. It means the loan funds a large share of the purchase and up to all of the rehab budget, while you carry the rest. This table separates the buckets.
| Cost | Loan funds it? | Who carries it |
|---|---|---|
| Purchase price | Partly, by tier | Loan plus your cash |
| Rehab budget | Up to 100%, via draws | Loan, after you front the work |
| Closing costs | Usually no | You |
| Interest carry | Usually no | You, from reserves |
| Overruns | No | You |
Rehab financing of up to 100% of the budget is real. It is also reimbursement-based, so you float each phase first. That is why the phrase 100% financing misleads new investors. A 100% rehab draw is a statement about the budget, not about your cash needs.
What Leverage Can You Expect on a Flip?
Leverage on a flip is measured against project cost, not purchase price. Across the wholesale network Lendmire places files with, the top tiers are reserved for experienced investors. Figures vary by lender, property, and experience, and nothing here is a commitment to lend.
| Experience | Leverage on fix-and-flip |
|---|---|
| Fewer than 2 completed projects | 85% of project cost |
| 2+ completed projects | 90% of project cost |
| 5+ completed projects | 93% of project cost |
Every tier is capped at 75% of after-repair value. That cap is the part newer flippers miss. The lender takes the lower of the two limits.
For a purchase with no rehab, a bridge loan can reach up to 80% of the purchase price. That is a separate structure from a flip with a holdback.
Worked Example: Where the Cap Bites
Run the numbers on percentages, not dollars. These ratios are modeled assumptions, not market data.
Deal one. Say purchase plus rehab together equal 82% of the after-repair value. At the 85% tier, the cost-based limit works out to about 69.7% of ARV. That sits under the 75% cap, so the cost limit rules. You fund the remaining 15% of project cost, plus closing costs and carry.
Deal two. Now say project cost equals 90% of ARV. The same 85% tier would compute to 76.5% of ARV. The cap trims it to 75%. You cover the shortfall, which here is roughly one-sixth of project cost rather than 15%.
Deal three. Take the 93% tier on deal one’s 82% cost-to-ARV. The cost limit computes to about 76.3% of ARV. The cap trims it to 75% again. The experience tier did not help, because the value cap decided the loan.
The takeaway is simple. The thinner your spread between project cost and ARV, the more the cap, not the headline tier, sets your cash in. A thin-spread flip is also a thin-margin flip. Not ideal.
How Do Draws Work, Step by Step?
A draw is reimbursement for work you have already finished. The sequence is the same on most files, though paperwork and inspection rules vary by lender.
1. You complete a phase of the scope of work.
2. You pay the contractor and suppliers.
3. You submit a draw request. The package usually includes a draw form, an updated budget, invoices, progress photos, and contractor lien waivers, per a practitioner walkthrough on rehab draws and inspections.
4. The lender inspects the work.
5. The lender reimburses the approved amount.
6. You start the next phase.
Look at who pays first: you do. Contractors often want money up front for materials and labor, and reimbursement arrives only after inspection. That gap between spending and reimbursement is your real cash need, and it never appears on the loan summary.
Draws are not automatic either. Slow paperwork or a missed inspection stalls your next phase, and your carrying costs keep running while it waits.
The Three Cash Buckets
Plan for three separate pools of cash, not one.
- Due at closing: your share of project cost at your tier, plus closing costs.
- Fronted before reimbursement: the next phase of work, paid before the draw arrives.
- Reserves: interest carry, insurance, utilities, and a contingency line for surprises.
Most first-time flippers budget the first bucket and underfund the other two. Lenders also tend to look for proof of liquidity at application. The loan application usually asks for the contract, a line-item scope of work and budget, comparable sales supporting your ARV, contractor information, and proof of funds.
Where the Money Gap Shows Up
Overruns. The loan funds the approved budget, not whatever the job ends up costing. A contingency line item in the budget helps. So does knowing whether your lender lets you shift unspent amounts between lines.
Scope changes. Repairs you discover after submitting the scope may not be credited in the inspection. Raise changes with the lender before you do the work, not after.
A low appraisal. Say the ARV comes in 10% under your estimate. The 75% cap shrinks by 10% as well, even though your costs did not change. The loan gets smaller and your cash in goes up. Support your ARV with solid comps before you sign the contract.
Carry costs. Terms on these loans run 6 to 18 months, interest-only, with no prepayment penalty, again varying by lender, property, and experience. Interest generally accrues on funds already advanced, so a heavy early draw schedule costs more than a back-loaded one. Every month the project runs long, you pay for it.
One pattern from broker-side file review: the flips that strain reserves are rarely the ones with a bad purchase price. They are the ones where the first contractor payment, a slow inspection, and a lower-than-expected appraisal all land in the same stretch.
Cosmetic Rehab or Heavy Rehab?
A cosmetic flip (paint, flooring, kitchen refresh) moves through few draws and carries less risk. A heavy rehab strains the structure more. The lender looks harder at your track record when the budget is large relative to the purchase price, and a first-time flipper with a big scope is the profile that gets the most scrutiny.
Heavy rehabs also lean harder on the ARV cap, because the rehab budget pushes project cost closer to the finished value. If your experience is light, a cosmetic scope on a modest purchase is the easier first project to finance.
Does the Market Still Support Thin-Margin Flips?
Margins have been narrowing, which makes financing costs matter more. ATTOM counted 77,991 single-family and condo flips in its latest quarterly report, and The Title Report’s summary of that data puts the typical margin at 21.5%, down from 25.7% in the prior quarter and 27.6% a year earlier. ATTOM’s metro analysis of flipping returns found that homes bought for $100,000 to $200,000 produced typical margins of 28%.
What If the Flip Becomes a Rental?
Hard money is a bridge, and the longer you stay on it, the more it costs. If you decide to hold the property, many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The DSCR loan sizes on the new appraisal and on rent coverage, not on your projected ARV. For the mechanics, see Lendmire’s piece How to Make a DSCR Cash-Out Cover Your Hard Money Note and Rehab Cards.
Be clear on what DSCR measures. It compares rent to the full monthly payment, and nothing else. Clearing the number does not mean positive cash flow, because repairs, vacancy, management, and utilities sit outside it. Lendmire’s complete DSCR loans guide walks through the full qualification picture. Do not assume a cash-purchase exception will let you skip a lender’s seasoning rules after a hard money lien, since DSCR lenders set their own.
Can Hard Money Cover a First Flip?
Often yes, at the lower tier. First-time investors qualify at the 85% of project cost tier, subject to lender guidelines. Across the network, credit starts at a 620 minimum score, with additional conditions below 660. Underwriting stays focused on the property, the plan, and the exit, so a realistic scope and well-supported comps carry real weight.
The properties must be non-owner-occupied residential, one to four units. A home you plan to live in is not a hard money flip. Loan sizes run up to $5,000,000, with larger balances by exception, and smaller balances vary by lender.
A Pre-Application Self-Test
Before you call a lender, answer these:
- Is your ARV backed by recent comparable sales, not hope?
- Is your project cost at or below roughly 75% of that ARV, or do you know exactly how much the cap leaves you to fund?
- Can you cover your tier’s cash share, closing costs, and the first draw’s worth of work?
- Do you have reserves for several months of carry plus a contingency?
- Is your scope itemized, with contractor bids in hand?
- Do you have an exit, either a sale or a refinance into a rental loan?
If you answered no to two or more, the loan is not your problem. The deal structure is.
Tax Note
Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
Does 100% financing mean I put no money down?
No. Up to 100% of the rehab budget can fund through draws, but it is reimbursement for finished work. There is no true 100% purchase program, and you still carry your share of project cost, closing costs, and carry. Experience tiers run from 85% to 93% of project cost, capped at 75% of ARV.
Who pays the contractor first?
You do. The lender reimburses only after the work is done, inspected, and documented. Plan to front each phase and keep enough liquidity to absorb the gap. Slow inspections lengthen the time your cash is tied up.
What happens if the rehab runs over budget?
The overrun is yours. The loan funds the approved budget, so build a contingency line into the scope. Ask your lender up front how scope changes and budget reallocations are handled.
What if the appraisal comes in below my ARV?
The loan shrinks. Because the cap is a percentage of ARV, a lower value cuts the maximum loan even when your costs stay the same. You then fund the difference, so size your cash buffer against a conservative ARV.
Is a purchase-only bridge different from a purchase-plus-rehab loan?
Yes. A bridge for a purchase with no rehab can reach up to 80% of the purchase price. A flip loan sizes on project cost with a rehab holdback, tiered by experience and capped at 75% of ARV. All figures vary by lender, property, and experience.
Next Step
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. Investors who move through a flip with the least friction are often the ones who budget the carry before they bid.
For current guidelines and terms on flip financing, read Lendmire’s piece Can a Single-Family Fix-and-Flip Get Approved for Hard Money?.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s traditional personal-income documentation, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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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. Yieldstack – Fix and Flip Draw Schedules
2. Medium – Rehab Draws & Inspections
3. ATTOM
4. thetitlereport.com: Attom Report Showing Continuous Drop in Home Flipp
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Hard Money Lender Sizes the Maximum Term for a Flip · Hard Money Bridge Down Payment Documents for a Single-Family Home · How to Compare National and Local Hard Money Lenders for a Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.