What actually gets a fix and flip loan approved fast (lender side)

Question

I'm on the lending side of fix and flip and bridge deals, and the files that close in 7 to 10 days almost always look the same. The slow ones tend to stall on the same handful of things. Here is what I see, in case it saves someone a week.

1. A rehab budget that is line by line, not one number. "45K rehab" gets questions. Roof 12K, kitchen 9K, two baths 8K, flooring 6K, paint 4K, mechanicals 6K gets approved. The appraiser and the draw inspector both work off that scope, so a vague budget slows two steps, not one.

2. Comps that support the ARV you are claiming. Send 3 sold comps within about half a mile and 6 months, similar size and bed and bath count, and note which one your finished product matches. If your ARV is 20% above the best sold comp, expect the appraisal to come in lower and the loan to shrink.

3. Know your cash to close before you apply. Quick example: 200K purchase, 50K rehab, 350K ARV. If a lender funds 90% of purchase and 100% of rehab, the loan is 230K and you bring about 20K plus closing costs and a few months of payments. If the lender also caps at 70% of ARV, that is 245K and you are fine. If the appraisal comes in at 310K, 70% is 217K and your cash to close jumps by about 13K. Run that downside before you sign the contract.

4. Experience documented, not described. A simple list of past deals with address, purchase price, sale price, and settlement statements. Two documented flips usually count for more than ten mentioned ones.

5. Entity and title ready early. LLC docs, EIN and operating agreement in one PDF, and a title company that gets the commitment out in the first few days. Title is the most common reason a 10 day close turns into 25.

None of this needs W2s or tax returns with most private lenders, which surprises a lot of first time flippers. The asset and the plan carry the file.

What slowed down your last loan? Curious what others run into.

Juan Hasbun · Answer

Great post. I'd add one more item that I think gets overlooked quite a bit:

Have a clear exit strategy before you apply, not after you close.

A lot of borrowers focus on getting approved for the acquisition loan, but the lenders that move the fastest want to know how you're getting out of it.

If it's a flip:

• What are the realistic resale comps?
• How much margin is left after selling costs?
• How long are similar homes actually sitting on the market?

What are the realistic resale comps?

How much margin is left after selling costs?

How long are similar homes actually sitting on the market?

If it's a BRRRR:

• What's the projected rent?
• What refinance program are you targeting?
• Will the property cash flow at today's rates?

What's the projected rent?

What refinance program are you targeting?

Will the property cash flow at today's rates?

The other thing I see helping deals move quickly is when borrowers proactively address the weaknesses in a file.

For example:

• "The roof is older, and we've already budgeted for replacement."
• "This comp sold higher because it has an extra bathroom."
• "The rehab came in over budget, but here's where the additional capital is coming from."

"The roof is older, and we've already budgeted for replacement."

"This comp sold higher because it has an extra bathroom."

"The rehab came in over budget, but here's where the additional capital is coming from."

Underwriters and lenders are going to find those issues anyway. When a borrower identifies them first and provides a solution, it builds a lot of confidence.

As for what slows deals down, title is definitely near the top of the list. I'd also add last-minute changes to the purchase contract, incomplete entity documents, and borrowers who underestimate the cash they'll need to bring to closing if the appraisal comes in light.

In my experience, the fastest closings aren't necessarily the easiest deals. They're the deals where the borrower is organized, transparent, and has already thought through the questions the lender is likely to ask. Those files tend to fly through the process.

Mike Klarman · Answer

What closes a deal fast is repeat business. They already have lots of the needed docs from previous loan and the processing time is cut in half or less.

If you have no relationship and are brand new to the lender then you need good credit, you need a scenario that does better than pencil it needs to beat margin expectations. You need to get all the docs together and over to the lender. Order appraisal and title right away and get those going.

The speed of the lender will vary depending upon loan officer, capacity, priority, and also incompetence. Lenders make mistakes. Lenders get lazy. lenders procrastinate

Christian Leon · Answer

Good point on the draw list, Vladimirs. In my experience the budget causes more delays than the inspection. The inspection itself usually gets scheduled within 2 to 3 business days, but a vague line like "kitchen 15K" turns every draw into a debate about what percent is done. When the budget breaks that into cabinets, counters, appliances and labor, the inspector can sign off piece by piece and funds move quickly. The other common slowdown is requesting a draw before the stage is actually finished, which means a second inspection visit and another few days of waiting.

Vladimirs Veiss · Answer

@Christian Leon thank you for writing this from the lender side, really useful! Point 1 is the one I'd underline twice. A line by line budget is not only for the lender: it's the same list the draw inspector, the contractor and the investor will look at on every draw, so if it's vague at the start, every draw turns into a negotiation.

On our renovation projects each stage closes with photos and a sign off before any money moves, so every payment conversation starts from the same list. From your side, what slows draws down more often: the budget itself, or the inspection? Have a great evening!

What actually gets a fix and flip loan approved fast (lender side)

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