How to Underwrite a Hard Money Fix and Flip Loan?

Underwriting a hard money loan is different than underwriting a typical home mortgage loan.  First off, hard money loans are generally not underwritten based on the borrower’s income, which typical home mortgages are.  “Generally speaking, hard money fix and flip loans are more focused on the value of the asset and the borrower’s ability to execute the rehab portion of the deal” says John Femenia, our founder.

What are the major criteria of underwriting a hard money fix and flip loan?


Valuation is one of the mot important factors when underwriting a hard money loan.  An independent appraisal is the best method of determining value.  The appraisal should always be ordered through an 樂威壯 appraisal management company (AMC). This ensures that the value was not influenced by the borrower.  Also, on a fix and flip bridge loan, the appraisal should be completed Subject To according to the appraisal.  At least 3 comps are needed, and should be comparable to the subject in terms of size and condition.  Comps should not be located more that 1 mile away, closer if in an urban area. 

Borrower Experience:

When it comes to fix and flip bridge loans, especially deals that require a large renovation budget, we want to make sure that the borrower has prior experience with similar projects.  We typically require borrowers to have at least 3 completed deals in the past 36 months.  A completed deal is a deal where the borrower has bought, renovated and sold a property. 

We verify completed deals by checking public records to ensure that the borrower, or an entity that the borrower owns, was on title.  For deals that were owned by and entity, we require that the borrower send us either the Operating Agreement’s or By Laws for the entity.  Additionally, if an Operating Agreement or By Laws is not available, a closing statement or HUD from the purchase and sale will suffice.  “Verifying experience is probably the most time-consuming aspect of underwriting a fix and flip loan,” says John Femenia.


Even though our loans are “hard money” and primarily underwritten on the value of the property, the borrower’s credit score is also an important factor.  We pull credit on all borrowers and check the borrower’s payment history. We take a close look at any lates on mortgages. Any lates on mortgages are a red flag.  If a borrower has a checkered credit history, we my either lower our LTV or increase our rates, sometimes both. 


Liquid assets is the borrower’s ability to pay service the loan as well as fund any unexpected expenses encountered during the property renovation.  We typically like to see a bank statement with a balance that can cove closing expenses, three months interest as well as 10% of renovation budget.  We require the bank statement to be within 60 days of closing.  Additionally, the bank statement has to be in the name of the borrower, or an entity the borrower owns.  Operating Agreements and By Laws are required to prove ownership for accounts in the name of an entity. 

While there are other items we consider, the aforementioned items are the major items we consider when underwriting a fix and flip loans. For more update, follow us on twitter at