What You Need to Know about House Flipping Loans

Couple receiving a bridge loan

Obtaining loans for flipping a house was fairly easy 20 years ago. Almost anybody could walk in to a bank and walk out with a mortgage a short time later. That is no longer the case. Not only are mortgage lenders more discriminating, they are also more wary than ever about loaning to house flippers.

This is not to say that you cannot get loans for flipping a house. Rather, it’s just that you need to know where to look. You also need to know what to expect. Whether a traditional mortgage or a hard money loan, a loan for house flipping is going to be a bit different. Below are some of the most important things you need to know.

 

Loans Are Short-Term

 

House flipping, by definition, is a short-term business. You buy a house just long enough to renovate it before putting it back on the market. As such, lenders do not provide flipping loans with 30-year terms. A typical hard money loan for flipping has a term of one year, although some might be shorter.

The goal here is to get the house renovated and sold as quickly as possible. Depending on its condition when first obtained, the flipper ideally wants to dispose of a property within 6 to 12 months of purchase. The faster the house is sold, the better. As such, lenders want their money back just as quickly.

 

First Position Liens

 

Whether the flipper borrows from a hard money lender or goes the traditional bank route, the lender will have a first position lien on the property. In the event of default, the lender can repossess the house and sell it to recover its money. Assuming the loan is paid off on time, the lien is removed and the deed to the home shows the new owner as the sole owner of the property.

Both hard money loans and traditional mortgages are available for flipping houses. However, most loans for flipping a house come from hard money lenders who find it easier to approve loans and can do so in less time.

Our lending experts can help you determine if a house flipping loan is right for you. Give us a call to learn more about our house flipping loan services!