Flipping Houses

How to Get A Loan To Flip Houses in 4 Steps

Expertise: Flipping Houses, Personal Development, Real Estate Investing Basics, Mortgages & Creative Financing
105 Articles Written
4 Proven Ways That You Can Get A Loan To Flip Houses

Nearly everybody I talk to says that “money” is the number one issue that prevents them from getting started flipping houses.

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I get this question all the time.

Thousands of people have asked me this in fact through meetups, REIA meetings, on the BP forum here as well as well as my own personal email list and blog.

Personally, I don’t like traditional financing is the right way to fund flips. I’d much rather flip houses with other people’s money like private lenders.

However, if you’re bankable and you feel traditional banking is the way to go, then this way of getting a loan for your flip should no be discounted.

One of my partners at House Flipping School funded ALL of his flips through traditional bank loans…so trust me, it can be done.

The Truth About Banks and House Flips

Of course there are house flipping pros who believe that with the economy still recovering, banks have tightened their restrictions on loans for investors so much that it's nearly impossible to get a loan nowadays.

Although private money is how I fund all my flips, if you are a beginner, I recommend that you try the traditional bank loan route first.

Banks ARE in the business of lending money…so keep an open mind!

Different Kinds of Loans a Bank Offers

Take note that conventional mortgages and traditional loans are very different from government backed mortgages. Most banks sell both kinds but they are very different for an investor and potential buy and hold or short-term house flipper.

Traditional bank loans, other than the fact that they are not backed by the government, the entire risk factor for the loan remains with you. Taking out a FHA or VA loan is very different from taking out a traditional mortgage on real estate. Check with your bank on which applies to your situation.

If you are a first time home buyer and purchase a two-family home, live in one side and rent the other, this is a great way many new investors use to get into their first real estate investment. I know many people who launched their house flip careers doing just that.

Credit unions and banks will issue you a traditional loan under the assumption that if you default, you will carry the risk. As a result, you'll need to meet stricter lending requirements and potentially make higher down payments as a result – so this could be cost prohibitive for you if you are short on cash.

If a large down payment is needed however, you can always get the smaller portion of the cash needed from a hard money lender or private money lender and then use that cash to fund the down payment. Of course you'll need that cash in hand when you go to the bank.

Related:  6 Wicked Cool Ways To Finance Your Next House Flip.

Suffice to say, there are many options to consider and many combinations of how the money will flow for your flip or investment property, so the idea is to be creative and keep an open mind.

4 Steps To Get A Loan To Flip Houses

If you go back in history, traditional mortgages were the first mortgages to ever be issued.

However, mortgage financing is a concept that was developed recently to cater to people who have special demographic requirements and income levels.

Here are four steps could help you get a traditional bank loan for your house flips.

1. Check Your Credit Score

Banks love people with good credit scores, which is why it is important that you check what yours is. Credit scores are like your driving record. They don’t just take into account your present actions; they also take into account your behavior in the past years.

Related: 4 Ways To Build Your Credit Score Today (Without Spending Any Extra Time)

A credit score is composed of the following:

Payment history (35% contribution on the FICO scale) – how timely you’ve paid bills in the past

Debt (30% contribution on the FICO score)

  • Revolving debt – This is credit card debt, retail card debt or gas card debt.
  • Installment debt – This is a type of debt where there is a fixed payment for a fixed period of time like an auto loan.
  • Open debt – This is the kind of debt that must be paid in full each month.

Credit File Age (15% contribution on the FICO scale) – The older the credit report, the more favorable.

Account Diversity (10% contribution on the FICO scale) – The more diverse your debt, the better here.

If you’re looking to get approved for a mortgage to fund a flip, a credit score of 620 or higher should suffice – but your interest rate may not be as favorable if you were in the 700s.

Try as much as possible to raise your credit score a few months before you apply for a mortgage loan by affecting any number of the segments listed above.

Also there are several ways that you can increase your credit score – such as checking for errors in your credit report, reducing the amount of debt you owe and setting up payment reminders among others.

2. Organize Your Documents

When you apply for a loan, ensure that all your documents are in order before approaching the bank for a loan. Get your assets and income verified and prepare to pay private mortgage insurance or make a down payment of at least 20% of the value of the house.

Lenders require private mortgage insurance mostly due to the risk of default. Other documents that you will need to provide the bank with include your account and bank statements, your employment history, recent tax stubs and W-2 tax forms.

3. Don’t Just Rely On One Bank

Once you have familiarized yourself with mortgage requirements, you should start contacting several lenders. Don’t just zero in on one because that happens to be your personal bank. Look elsewhere.

This is where networking and meeting bankers at events is so vitally important to your real estate investing career.

This is because different lenders may have different terms. As a matter of fact, you might find that the bank where you do your daily transactions doesn’t have the most favorable terms.

You shouldn’t also strike credit unions off your list just yet; there are some credit unions which offer great rates to their members.

Have an open mind and contact as many as you can so you can stay organized.

4. You Might Need To Provide Extra Documents

Documentation is especially critical for people who are self-employed. Self-employed people are notorious for declaring lower levels of income to avoid paying taxes…but when applying for a bank loan, this will come back to bite you.

The huge number of mortgage defaults since 2008 has led to many lenders scrutinizing mortgage requests. Your lender might ask you to present copies of your taxes for the past two years.

Lenders go through the whole scrutinizing process to ensure that borrowers have sufficient cash reserves after they’ve bought the home.

Document as much of your income as possible and do your best (tough indeed) to declare realistic levels of income on your taxes where appropriate.


Getting a traditional loan mortgage shouldn't be difficult as long as you do everything correctly and at the right time. The steps above are simple ones to follow when taking out a traditional mortgage.

Remember that banks are in the business of lending money…despite what you may think!


Having everything organized ensures that you accelerate the process and consequently avoids lots of time wastage and back and forth with the banks.

Also don’t forget that a simple mortgage calculator is also important because it will help you get an approximate estimate before starting anything.

Do you have any other ideas that you use to get a traditional loan to flip houses? Share your ideas by leaving a comment below.

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

    Antonio Coleman
    Replied about 5 years ago
    Michael, That credit thing is one of the #1 struggle for most newbies investors. Truth is that life throws us a curve ball, and that good credit we had at 21 is no longer the case at 31. So bout this time you really have to head the other route in life on been creative. You can.. Ask family members Ask a college kid “yea it works” Ask “hard money lenders” The list goes on and on, but what remains the same is that you need to the money for the flip. So if you have not so good credit start thinking out side the box to find those funds. Hey Michael, what you think about doing fundraisers to gain the money for flips. I never tried it, but I think its possible. Antonio Coleman “Signing Off”
    Replied about 5 years ago
    Absolutely Antonio and we don’t use banks only. We also use hard money and private money and are creative in equity deals. Banks are just one more vehicle to borrowing money. I am not sure about fundraiser as I have not done this. This may crowd funding or some sort your referring to. Always check with your attorney when it comes to pooling money from multiple sources to make sure you don’t break any SEC rules and regs. All the best
    Jason Adams
    Replied about 5 years ago
    I just attended a Small Business Boot Camp here I in San Deigo. Our local small business lender suggested building your credit score a year in advance of when you ask for the money. I asked them during an intermission if they do mortgages, they don’t, but they will lend money to a company that invests in real estate.
    Replied about 5 years ago
    Not bad advice. You should always be thinking to improve you credit so when the day comes to borrow from the bank you have a good score. You should also set up a company to borrow money and keep it separate from you personally for liability and many more reasons. You will still have to sign personally. Check with your CPA and attorney to establish your best form of business entity. Good luck
    Replied about 5 years ago
    When contacting banks and/or credit unions about rates, won’t they pull your credit? If that’s the case, will the credit inquiries from a few banks damage your credit score? Sounds a little counter-intuitive.
    Replied about 5 years ago
    They shouldn’t have to pull your credit just for giving you a rough idea on rates. I would suggest you ask them first and when you get far enough along of them collecting information from you at some point they will pull credit and it does effect in a small way your score so don’t go sending in a bunch of applications for loans. Not the way you want to go about it anyway.
    Replied about 5 years ago
    @Patrick you may take a minor hit of 4 to 5 points to your credit score by having your credit pulled. But thats a small price to pay if you get approved, because now you have the funds you need. A little known fact is the credit bureaus (Equifax, Experian and Transunion) allow a “rate shopping period” of no longer than 30 days in which you only get dinged once for similar types of credit inquiries. This applies especially to mortgages and not auto loans and credit cards.
    Replied about 5 years ago
    Great explanation Chris. Thanks for providing the detail to this question from Patrick
    Replied about 5 years ago
    Great explanation Chris. Thanks for providing the detail to this question from Patrick Reply Report comment
    Replied about 5 years ago
    Great explanation Chris. Thanks for providing the detail to this question from Patrick
    Replied almost 5 years ago
    Hello Michael Ive worked for my dad in fixing up and selling manufactured homes and on occasion he buys fixes up and sells a real estate property here and there. It is not a partnership and I do not have the cash to buy a property in full to flip. However I do have excellent credit and knowledge on fixing a home up. what is the best way for someone like me to purchase a property to flip with minimal down? Is house flipping money paid back differently than a traditional home loan? I already own a home so I dont think I could afford to make another payment by myself? What do you recommend? Thanks
    Replied almost 5 years ago
    You can look for a money partner where you bring in all the experience and knowledge to run the project and they put up the money or you can borrow money from a source like a hard money lender or bank if you qualify. If the desire is there you can make it happen. Spell out all the details in a proposal/investment package so the investor or lend knows exactly what they are putting their money into. You can make arrangements to pay the loan when the house sells.
    Replied about 4 years ago
    What type of loan do I want? I was just pre-qualified for a 100k investment property loan. Will have to put up around 20k, pay the loan for 2-3 months (or minimum 7 mo?), fees, appraisals, etc. looks like the bank wants all my profit. Can I even buy a foreclosure with this type of loan? Then my lender tells me I have to keep the property for 7 months. Even if I find a 65k distressed foreclosure that will potentially sell for say 115k, they are eating away any decent profit. I have asked several lenders straight up & they seem to want to push me in the wrong direction. Is there a specific loan for flipping homes? Don’t they understand that we are helping to bring run down neighborhood values up? Need help
    Replied about 4 years ago
    Larry again, please shoot me an email thanks
    Jason talarski
    Replied about 3 years ago
    Hi my name is jason. What’s your email? I had the same question as Larry. I’ve improved my credit by 200 points and I’m ready to start making money. Please advise me.
    Replied about 4 years ago
    My wife and I are trying to start flipping houses the problem is the financing. The question is getting private money , hard money or just get traditional mortgage loan. I know hard money gives rehab money all we have is the down payment. We can use the down payment for either the hard money loan or the traditional mortgage loan . Our credit is ok but not great someone please help !
    Eron Heath
    Replied about 4 years ago
    Hello, I’ve been doing home inprovement for years now and I am finally looking into flipping homes. I’m from Baltimore Md and there is many homes that need to be rehabbed. I’m looking into taking out a loan. What loan should I try to get approved for? I will not be working as much do to fixing up these homes is there a type of loan that is offered where you have a good bit of time before your first payment ? Thanks
    Replied almost 4 years ago
    I want to know the answer Larry asked.
    Replied almost 4 years ago
    I want to know the answer Larry asked.
    Rangel Romano from Ronkonkoma, New York
    Replied over 3 years ago
    Hi Michael, I want to start in the flip business and I was told, I can get a personal conventional loan + rehab (cheaper than a commercial loan) and then transfer the deed to a company, leaving the loan on my name. Is this the right way to do it? Or should a better get a commercial loan through a company and assume higher costs?
    El Cisn from Houston, Texas
    Replied almost 3 years ago
    I want to know the answer from the question Larry asked. El Cisn From Houston
    Replied over 2 years ago
    The best flip is the house that you live in. You can work on it everyday when you come home from your full time job and when you have it listed and ready to sell you can afford to wait for the “right offer” instead of jumping on the first offer that comes your way. I’ve bought several houses in the 200k range and fixed them up and sold them for 300k. Then I take that money buy a couple of rentals and do the house flip all over again. My wife is my partner and she even helps with the flips, she does the painting, back-splash, and tiling while I do the electrical, HVAC, plumbing and drywall. For additions and large code required projects I have a general contractor that I trust that does amazing work. What we learned is that YouTube is the greatest teacher of them all, if you don’t know how to do something then YouTube it. Lowes and Home Depot even have dedicated channels on YouTube that teach you everything you need to learn. One more thing, flipping is exactly like what you see on TV there is always an issue and sometimes it costs big $$$, be prepared and have plenty of tums ready. Just keep your eyes on the prize and with hard work and determination you can overcome any obstacle… Unless it kills you, then your probably not going to overcome it.
    Replied over 2 years ago
    Oh yea, banks fund all my flips. I use a mortgage broker and my Credit score is in the 750-800 range. Because they are all loans for homes that will be my primary residence I only have to put down at most 5%. Don’t bother paying down loan origination points if your planning on selling in 6 months to a year. Always ask the seller to provide a seller credit of 5-6%, that will pay for your closing costs so it doesn’t come out of your profit. The mortgage broker I use is SWBC mortgage.
    Luke Smith
    Replied over 2 years ago
    Thanks for pointing out that for someone beginning in the world of home flipping having a bank loan on your side would be a good way to get the job done right. I imagine that while it could detract from your profits a little bit, having the capital there would make it more likely that you manage everything adequately and don’t overlook details. I am sure that meeting with more than one bank about loan options would also be a good idea, as it would help you shop for the best rates.
    Replied almost 2 years ago
    i would like to know the answer to what Larry asked as well. i am in the same kind of situation