For Mortgage Loan Officers
How to Qualify a Rehab Loan
Fix and flip lending is asset first, not borrower first. Ask an experienced flipper for two years of tax returns and they will move on to the next broker. Here's how to qualify a rehab deal, talk to investors with confidence, and get to a term sheet fast.
No contract. Keep your old system for 30 days.
Loan Estimates vs Term Sheets
Conventional file
- Starts with income, DTI and credit
- Loan Estimate and Closing Disclosure
- Funds in full at closing
- Underwriter reviews the borrower
Rehab file
- Starts with purchase price, rehab budget and ARV
- Term sheet or letter of intent from the lender
- Rehab funds held back and released in draws
- Lender reviews the deal, the exit and the track record
The Numbers Rehab Lenders Check
| Feature | What it means | Common range (varies by lender) | Why it matters |
|---|---|---|---|
| LTC | Loan to cost: loan vs purchase plus rehab | Often 85% to 90% of purchase, up to 100% of rehab | Sets how much cash the investor brings |
| LTARV | Loan to after repair value | Often capped around 70% to 75% | Protects the lender if the flip goes wrong |
| Track record | Projects completed in the last 24 to 36 months | More deals usually means more leverage | Drives pricing and loan tier |
| Liquidity | Cash for down payment, closing and first draw | Lenders want reserves verified | Investors fund work before reimbursement |
| Interest | Dutch (full loan) vs non Dutch (drawn balance) | Depends on the lender | Changes the investor's real cost |
From First Call to Term Sheet
Ask the 5 First Call Questions
Purchase price and rehab budget, projected ARV and comps, recent completed projects, cash on hand, and how title is held (LLC or entity).
Run LTC and ARV
Check the loan against total cost and after repair value before you shop it. If it doesn't fit, adjust the structure early.
Confirm Liquidity
Make sure the investor can cover the down payment, closing costs and the first round of work before the first draw is released.
Explain the Draw Schedule
Rehab money sits in escrow. Work gets done, an inspection is ordered, then the draw is released. Set this expectation up front.
Match the Right Lender
Lenderbase helps you find lenders who fund the property type, rehab size and experience level of each deal.
Package and Quote Fast
Collect the scope of work, purchase contract and entity docs in one file so you can get a term sheet back quickly.
Want to see how it stacks up? See how Private Money HQ compares
Rehab Loan Questions From Loan Officers
Usually not in the way conventional loans do. Most private lenders focus on the deal, the borrower's experience, credit and liquidity. Requirements vary by lender.
Qualify and Close Rehab Loans With One Place
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