Fix & Flip Loan Requirements: LTC, ARV, and What Gets Deals Declined
Every flip loan on the market gets sized by the same three questions: what does the project cost, what will it be worth finished, and have you done this before? The answers set your leverage, your cash-to-close, and sometimes whether the deal happens at all. Here’s how lenders actually run those numbers — with the current program maximums — so you can size your own deal before you write the offer.
The two tests every flip loan must pass
| Test | Formula | Current ceilings |
|---|---|---|
| Loan-to-cost (LTC) | Loan ÷ (purchase price + rehab budget) | Up to 95% |
| Loan-to-ARV (LTARV) | Loan ÷ after-repair value | Up to 75% |
Your loan is the smaller of the two. Example: purchase $400,000, rehab $100,000, ARV $650,000. The LTC test at 95% allows $475,000; the ARV test at 75% allows $487,500. LTC binds — the loan sizes at $475,000 and your cash into the project is roughly $25,000 plus closing costs and reserves. Now run a thin deal: same purchase, same rehab, but ARV of $580,000. The ARV cap drops to $435,000 and suddenly you’re bringing $65,000. That’s the discipline built into the structure: the worse your margin, the more of your own money the deal demands. If the two tests are fighting each other, the deal is telling you something.
What the current programs allow
- Loan amounts up to $10,000,000 on 1–4 unit residential projects.
- Terms of 6–24 months — enough runway for the renovation and the sale, with extension options on many programs.
- Credit from 500 on entry programs, and no-credit-score options exist for foreign nationals and thin-file borrowers. Stronger tiers open around 650–680, and leverage follows credit.
- First-deal investors qualify. Zero completed projects doesn’t disqualify you — it caps you at lighter rehab scopes or requires an experienced GC running the work. A few completed projects moves you up the grid; a deep track record unlocks the 95% LTC tier.
- No tax returns, no DTI. These are business-purpose loans underwritten on the project and your liquidity — not your personal income. Self-employed investors aren’t penalized here the way they are in consumer lending.
Light rehab, heavy rehab — and the line where it becomes construction
Programs scale with project intensity. Cosmetic work — paint, floors, kitchens, curb appeal — runs at the friendliest terms and is where first-timers should live. Once the rehab budget approaches or passes the property’s as-is value — additions, structural work, full guts — you’re in heavy rehab territory: still fundable at up to 90% LTC, but with real scrutiny on the budget, the timeline, and the contractor. Push past that into foundations and framing and you’ve crossed into ground-up construction, which is its own program family. The label matters: the same project structured under the right program can carry meaningfully more leverage.
Draws, carry, and the cash you actually need
The rehab budget funds in stages. You close with the purchase advance, then the renovation money releases in draws as inspections confirm completed work. Practical math for your planning: down payment on the purchase side, closing costs, several months of carrying costs in reserves, and enough working capital to float each rehab stage until its draw hits. A 95% LTC program doesn’t mean 5% total cash — it means 5% plus the float. Investors who model that gap finish projects; investors who don’t, stall at drywall.
Your exit is part of the application
Lenders fund flips against a credible exit, and you should pick yours before you close, not after the reno. Two clean paths:
- Sell. The classic flip. Your ARV comps are your exit evidence — make them defensible at application, because the appraiser will.
- Refinance and hold (BRRRR). Renovate, lease it, and refinance into a long-term rental loan sized on the property’s cash flow — pulling your capital back out for the next project. If rents come in light and the coverage math doesn’t pencil at completion, no-ratio options can still carry the exit.
If the plan is simply “buy now, decide later” on a property that doesn’t need work, that’s not a flip loan — that’s a bridge loan, and it prices and structures differently.
The five things that get flip files declined
- Fantasy ARV. Comps from the wrong neighborhood or the wrong finish level. The appraisal will find the truth; find it first.
- A rehab budget written on optimism. Underbaked budgets stall at the draw stage. Line-item it with your GC.
- Scope mismatched to experience. A first-timer proposing a full gut reads as risk. Start cosmetic, or partner with a GC whose résumé carries the file.
- No liquidity behind the deal. Reserves and draw float are underwritten. All-in with nothing behind the closing is a decline.
- Certain markets carry leverage haircuts — some judicial-foreclosure states and specific metros run about 5% lower. Know your market’s grid before you offer.
Size your deal before you sign it
I’ve spent 36 years watching the difference between investors who size deals before they commit and investors who hope. Bring me your purchase price, rehab budget, and ARV — I’ll run it across our programs and tell you the real leverage, the real cash-to-close, and which structure protects your margin. Full program details are on the fix & flip loans page, you can pressure-test any scenario against our complete program set with AboIQ, and when you’re ready: get funded.
Abo Capital · Company NMLS #1763084 · CA DRE #01167081 · FL MBR #MBR4882 · TX SML. Business-purpose loan programs for real estate investors. Figures shown are maximums across current programs (“up to”), not guarantees; all scenarios subject to full underwriting. This is not a commitment to lend. Equal Housing Opportunity.