flix and flip home loans

Financing a Fix and Flip Home – Is it Possible?

It’s true that traditional lenders won’t finance fix and flip homes. If a home doesn’t pass an appraisal (fix and flips usually don’t), they can’t fund the loan. But that doesn’t mean only cash buyers can buy fix and flip homes.

Hard money loans are the perfect answer to fix and flip homes. They provide the financing you need to buy and fix up the home. This allows you to fix the home up fast and turn a profit.

Here’s how they work.

Options for House Flipping Loans

You have a couple of ways to finance a fix and flip purchase. You can take out a new loan using the fix and flip as the collateral or use the equity in your primary residence as collateral.

Hard Money Loans – Using the Fix and Flip as Collateral

The most common way to finance a fix and flip is to take out a hard money loan. These loans are less focused on your personal qualifying factors and more on the property. Lenders look at the home’s current value (even in its unruly state) and at the after-repaired value as determined by a professional.

If there’s enough collateral in the property and you have ‘decent credit’ you might qualify for this simple program. Most hard money borrowers receive their funds within a couple of weeks, making it easy to get started on the rehab process right away.

Cash-Out Refinance – Using your Home’s Equity

If your primary residence has enough equity in it, you can tap into it, using it to buy a fix and flip. The process is a little more intricate because the underwriting requirements are stricter since it’s a traditional loan.

You can usually have as much as 80% of your home’s value outstanding. This means you might be able to borrow as much as 80% of the home’s current value minus any outstanding mortgage balances you have right now.

You can use the difference between the funds to pay off your mortgage and the new loan amount to fund the purchase and renovation of the fix and flip.

What to Consider When Buying a Fix and Flip

Before you buy a fix and flip, consider these factors:

  • Do you have enough funds to fix the home up the way that it requires so you can sell it for a profit?
  • Is the home in a market that supports the value you intend to create for it?
  • Is there a demand for homes in the area?
  • Do you want to invest your current equity in it or keep it separate by borrowing a hard money loan?

Final Thoughts

Financing a fix and flip home is a lot easier than most people think. At Save Financial, we offer many options to help you get the financing you need to make your dreams of real estate investments come true. If you’ve found the perfect fix and flip or you’re just starting, contact us today and let us help you get on the road to real estate investing!

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