The Quick Read: The down payment is a leftover, not a fixed percentage. The lender sets a maximum loan using two tests, one on project cost and one on after-repair value, funds the lower result, and you bring the rest plus fees.
- Two caps apply at once: a share of total project cost, and a share of after-repair value (ARV).
- The smaller loan wins, so the same borrower puts down different amounts on different deals.
- Across Lendmire’s wholesale network, fix-and-flip leverage typically runs 85% to 93% of project cost, never above 75% of ARV.
- Experience moves you between tiers. Closing costs and fees come on top of the down payment.
- Terms vary by lender, property, and experience, and nothing here is a commitment to lend.
Most new flippers ask what percentage to put down. A better question is which limit will bind on their deal. This article walks through how that works, with numbers expressed as ratios so you can drop in your own deal.
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 property should be worth once the renovation is done, usually estimated from comparable sales of renovated homes.
Project cost: the purchase price plus the rehab budget.
Loan-to-cost (LTC): the loan divided by total project cost. It is the cost-based test.
Value cap: the maximum loan as a share of ARV. It is the value-based test.
Down payment (equity gap): project cost minus the loan the lender will fund. Your cash, in other words.
Draw: a release of rehab money after a stage of work is finished.
What Is a Hard Money Flip Loan, Briefly?
A hard money loan is a short-term loan secured by the property itself, made by a private or non-bank lender. The lender cares most about the asset, the plan, and the exit. Your income matters less.
That changes how the down payment works. A bank sizes a purchase loan off the price. A flip lender sizes it off the finished product and what it costs to get there.
On the programs Lendmire places files with, terms run about 6 to 18 months, interest-only, with no prepayment penalty. Collateral is non-owner-occupied residential property, one to four units. Loan amounts go up to $5,000,000, and larger by exception. The minimum credit score is 620, with extra conditions below 660. Every figure varies by lender, property, and experience.
How a Hard Money Lender Sets the Down Payment: Step by Step
Four steps produce your number. Each one is simple. The trick is that the lender runs two of them side by side and keeps the stricter one.
1. The lender establishes ARV. It looks at sales of renovated homes near the property and often orders an appraisal on the after-repair condition. Your own ARV estimate is a starting point. The lender’s number is the one that counts.
2. The lender applies the cost test. It multiplies project cost by the leverage tier your experience earns.
3. The lender applies the value cap. On fix-and-flip files across the network, that cap is 75% of ARV.
4. The lender funds the lower result. Your down payment is project cost minus that loan, plus fees and closing costs.
Think of it as a lender hedging two risks. The cost test makes sure you have money in the project. The value cap makes sure the finished house can still repay the loan if the market softens.
The Experience Tiers
Leverage on the cost test depends on how many projects you have completed. Across the network, typical tiers look like this:
| Completed projects | Loan-to-cost | Value cap |
|---|---|---|
| 5 or more | Up to 93% of project cost | 75% of ARV |
| 2 or more | Up to 90% of project cost | 75% of ARV |
| Fewer than 2 | Up to 85% of project cost | 75% of ARV |
The top tier is reserved for experienced investors. First-time investors qualify at the lower leverage tiers, subject to lender guidelines and credit review.
Other structures exist too. A bridge purchase with no rehab typically goes up to 80% of the purchase price. A cash-out or rate-and-term refinance typically goes up to 65% of value. Ground-up construction can reach 90% of cost and 75% of completed value for borrowers with 3 or more completed projects, with larger builds handled case by case.
A Worked Example: When Each Limit Binds
Here is the crossover that most explanations skip. The table below uses modeled assumptions, not market data. It assumes the 90% loan-to-cost tier and a loan cap of 0.75 times ARV. Every dollar figure is written as a multiple of ARV, so you can scale it to any deal. A 0.60 means sixty cents per dollar of ARV.
| Deal quality | Project cost (× ARV) | Cost-based loan (× ARV) | Loan cap (× ARV) | Your cash (× ARV) |
|---|---|---|---|---|
| Strong spread | 0.60 | 0.54 | 0.75 | 0.06 |
| Moderate spread | 0.75 | 0.675 | 0.75 | 0.075 |
| Thin spread | 0.85 | 0.765 | 0.75 | 0.10 |
On the first two deals, the cost test gives the lower number, so it controls. You put down 10% of project cost. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
On the thin deal, the cost test alone would allow a loan of 0.765 times ARV. That sits above the 0.75 cap, so the cap controls and the loan is held to 0.75. Your cash climbs to 0.10 times ARV, which is about 11.8% of project cost. The lender stopped following the cost tier and started following the value cap.
The crossover point is easy to find. Divide 0.75 by your tier. At the 90% tier, the value cap takes over once project cost passes about 0.83 times ARV. At the 93% tier, it takes over near 0.81. At the 85% tier, it takes over near 0.88.
Now change only the borrower. Take the moderate deal and run it at the lowest tier. The loan falls to about 0.64 times ARV, and your cash rises to about 0.11 times ARV. Same house, same lender, different down payment.
What Else Moves the Number
Experience is the big lever, but it is not the only one.
- Credit. A 620 minimum applies, with additional conditions below 660. Credit helps you qualify. It does not replace cash. A strong score will not talk a lender out of the equity requirement.
- The strength of the spread. An underpriced purchase with a believable ARV needs less cash. A thin spread needs more.
- The property. Collateral is one-to-four-unit non-owner-occupied residential. Condition and scope of work affect how the lender views risk.
- The lender. Terms are set lender by lender. No federal rule sets flip down payments, so tiers, caps, and fees differ across the market. Seeing several lenders’ guidelines side by side is a large part of what a broker does.
“100% Financing” Decoded
There is no true 100% purchase program. A lender will not fund the entire purchase price plus everything else while also staying under its value cap.
What the phrase usually means is narrower. Up to 100% of the rehab budget can be funded in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value. The whole loan still has to fit under the cost tier and the 75% of ARV cap.
This explains why you sometimes hear a claim of zero down on a strong deal. If total project cost sits far enough below the value cap, the cost test may fund most of the project. Fees and closing costs still need cash. Treat one lender’s anecdote as an outlier, not a plan.
Cash to Close Is More Than the Down Payment
Your equity gap is only part of what you wire. Build the full stack before you make an offer:
- The down payment (project cost minus the loan).
- Points, lender fees, title, and closing costs.
- Proof of funds, which the lender will want to see.
- Early rehab spending before the first draw is released.
- A cushion for overruns, since the loan is sized on your budget, not on surprises.
Whether closing costs can be financed varies by lender. When they are, they count toward the same caps, so they do not make the deal cheaper. They just change when you pay.
Rehab Draws: What You Front
The lender typically holds rehab money back and releases it in stages as work is completed. Expect an inspection or documentation step before each release.
In practice, you pay for the first stage of work yourself, then get reimbursed. Plan for that float. A contractor who needs a deposit on day one does not care that your draw schedule is still pending. Many first-time flippers underestimate this and end up short on cash mid-project, even though the loan was sized correctly.
If the Appraised ARV Comes In Low
A low ARV hits you twice. It lowers the value cap, and it makes the deal look thinner. But a small miss does not always change your cash, because the cost test may still be the lower number.
Use the moderate deal from above, with project cost at 0.75 times the ARV you underwrote and a cost-based loan of 0.675. A 10% lower ARV pulls the value cap down to 0.675 in those same units. That exactly meets the cost-based loan, so your cash stays at 0.075. The deal is now sitting right at the crossover.
Go one step further. If the lender’s ARV comes in 15% lower, the cap falls to 0.6375. The cap now controls, the loan drops from 0.675 to 0.6375, and your cash rises from 0.075 to 0.1125 in the original units. Every point of ARV lost beyond the crossover comes straight out of your pocket.
A thin-spread deal feels this much sooner, because it starts at the cap already. That is why you should stress-test the lender’s ARV, not your own. Rerun your numbers at an ARV that is 5%, 10%, and 15% lower before you go under contract.
The 70% Rule Is a Screen, Not an Underwriting Number
Investors often screen deals with the 70% rule: pay no more than 70% of ARV minus repair costs. It is a shortcut for judging whether a deal has enough margin. It is not a lender requirement.
The two ideas do connect. A deal that passes the 70% screen tends to sit in the strong-spread row of the table above. There, the cost test binds and your cash stays near 10% of project cost at the middle tier. A deal that barely passes tends to land near the crossover.
Ways to Lower the Cash You Bring
Honest options, with honest limits:
- Buy further under ARV. This is the most reliable lever. A better spread means the cost test binds and the cap stays out of the way.
- Move up a tier. Each completed project can lift your loan-to-cost. It takes time, so it helps the next deal rather than this one.
- Trim the scope. A smaller rehab lowers project cost and your equity gap, though it may lower ARV too.
- Bring a partner. An equity partner funds part of your cash. That splits profit, but it keeps you in the game.
Skip the credit card as a down payment. Lenders look closely at where your cash comes from, and borrowed funds weaken the file.
Mistakes That Cost Investors Cash
- Mixing bases. Quoting a percentage of purchase price, project cost, or ARV as if they were the same thing produces wrong cash estimates. Always ask which one a lender means.
- Using your own ARV. The lender’s valuation sets the cap.
- Stopping at the down payment and forgetting fees, the draw float, and overruns.
- Assuming the same percentage applies to every deal. It does not, because the binding limit changes.
Where the General Rule Breaks
The step-by-step method fits most standard flips. A few cases bend it.
Bridge purchases without rehab. With no renovation, the sizing is simpler: up to 80% of purchase price on the programs Lendmire places with.
Refinances. Cash-out and rate-and-term refinances size off value, typically up to 65%, not off cost.
Ground-up construction. Leverage is tied to both cost and completed value, with experience requirements that are stricter than for a standard flip.
Hold properties. Hard money is not the tool for a long-term rental. Rental loans are underwritten on the property’s rent covering its payment, a separate test from flip sizing. Many investors refinance out of hard money into long-term financing once the property is stabilized and rented, and Lendmire brokers that path. The complete DSCR loans guide explains how that test works.
Tax treatment varies; consult a qualified professional before relying on any deduction.
What the Decision Looks Like in Practice
Before you make an offer, run this short sequence:
1. Estimate ARV conservatively, then lower it by 5% to 10% as a stress test.
2. Add purchase price and rehab to get project cost.
3. Multiply by your tier, then multiply ARV by 0.75.
4. Take the lower loan. Subtract it from project cost.
5. Add fees, the draw float, and a cushion.
If the cash needed is more than you have, adjust the deal, not the math. Negotiate the price down, narrow the scope, or bring a partner. Condo deals raise extra property-type questions, which Lendmire covers in its piece How a Hard Money Lender Sets the Down Payment on a Condo Bridge Loan.
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. As a broker, Lendmire arranges these loans through select lenders in a network across 41 markets, including Washington, D.C. Each file is reviewed individually.
Frequently Asked Questions
Do I always need a down payment on a flip?
Almost always. With cost tiers topping out at 93% of project cost and a 75% of ARV cap, some cash is part of the structure. A very strong spread can reduce what you bring, but fees and closing costs still need funds.
Can the lender fund my entire rehab?
Up to 100% of the rehab budget can fund in draws against completed work. That figure applies to the rehab budget only. The total loan still has to fit within the cost tier and the 75% of ARV cap.
Does a high credit score replace cash?
No. Credit helps you qualify, with a 620 minimum and added conditions below 660. The equity requirement is set by project cost and ARV, not by your score.
Why did my down payment change on a second deal?
The binding limit changed. On one deal, the cost test controlled. On another, with a thinner spread, the 75% of ARV cap controlled. Moving up an experience tier can also reduce your cash.
Does a flip lender use a DSCR test?
No. Flip loans are underwritten on ARV, the spread, and the exit. The DSCR test, which compares rent to the monthly payment, applies to rental loans on hold properties.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. Corporate Finance Institute: Hard Money Loan
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Fix-and-Flip Hard Money Down Payment Requirements for a First Flip · Hard Money Fix-and-Flip Source of Funds Rules for the Down Payment · Hard Money Down Payment Requirements for a Distressed Purchase
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.