How to Get a Fix and Flip Loan With Bad Credit

A fix and flip loan is a type of mortgage that provides a substantial amount of financing to real estate investors. While most lenders only finance up to 65% of the ARV of a property, some will fund up to 85%. You’ll typically have to put up anywhere from fifteen to thirty five percent of the home’s value. Hard money lenders may offer 100% financing, but you will likely have to pay a high interest rate.

Obtaining a fix and flip loan requires a thorough understanding of construction and remodeling costs, as well as the estimated after-repair value. As such, it’s important to carefully run the numbers based on the terms of your loan. You’ll need to estimate the amount of money needed, as well as the time it will take to complete the project. You’ll also need to have an understanding of construction draws to be able to accurately estimate the cost of the project. To get the most competitive loan, make sure to find a private lender that will work with you to ensure your numbers are accurate and that the process is seamless.

While getting a fix and flip loan with bad credit is not impossible, it is significantly more challenging than getting a typical mortgage. You will need to have substantial cash reserves in case you’re turned down or your application is declined. Even if you qualify for a loan, you’ll probably have to make a much higher down payment than someone with good credit. Depending on your credit history, the amount of money you can borrow will depend on the lender’s underwriting standards, so don’t expect to borrow millions of dollars.

Another important factor to consider when applying for a fix and flip loan is whether you have enough time to complete the project. While many investors choose to flip homes for above-market returns, a fix and flip loan is not an investment for everyone. While you can borrow a fix and flip loan with bad credit, be sure to look into the terms and conditions of the loan before applying. You’ll want to make sure you complete the renovations in a timely manner so that you can recoup the loan in full.

A home equity line of credit (HELOC) is a common type of fix and flip loan. The borrower can use the equity in their investment property as collateral for the loan. A Home Equity Line of Credit will often have a five-year draw period and a fifteen to twenty-year repayment term. A HELOC allows you to use up to 85% of the equity in your investment property. Although the interest rate is higher, it’s an excellent way to fund a fix and flip.

A fix and flip loan is divided into two distinct phases: the purchase phase and the rehab phase. The purchase phase is relatively simple and the investor simply submits an application for a loan with all the necessary supporting documentation, appraisal, and a business plan for the property. Once approved, the closing process can begin. It will require a professional closing agent to ensure the loan closes smoothly. If the investor meets all the requirements, the loan should be approved and the investor can begin the rehab phase.