Many people break into real estate by buying a home and fixing it up to flip it. Called a fix and flip, it’s a popular way to start investing, but when you’re starting out you probably don’t have the financial backing that the TV stars who do it have. You may be looking at loans, a mortgage, a fix and flip loan or a rehab loan. What’s the difference between the types of loans?

Fix and Flip or Rehab Loan?

Fix and flip and rehab loans are typically the same. It just depends on how the lender refers to them. Sometimes, rehab loans apply to historic homes. Fix and flip loans need to cover more than the purchase price of the home, because you need funding to do the construction projects. If you don’t have the capital you need to invest in the materials, it will slow you down.

What About Mortgages?

A mortgage is a long-term investment by the lender. Fix and flip loans are more for short-term situations. Mortgages can take a long time, up to 30 days or more to close. You might lose out on a good opportunity for a fix and flip while you’re waiting to get funded. Fix and flip or rehab loans are designed to be able to close within 7 to 10 days. Fix and flip homes get picked up quickly, so you don’t want to be hampered by waiting.

What Do You Need for a Fix and Flip Loan?

Although you’re investing in real estate, your credit score needs to be as high as you can get it to get the best rates. The lender will also want information about the resale value of the property and renovation costs. You’ll want to make sure that the purchase price is below the market value to make sure you can make enough on the home.

Contact Painted Horse Financial for information on our fix and flip home loans.