What Kind of Loans are Available for a House Flip? A Guide for Mortgage Brokers

House flipping can be a profitable business, but securing the right financing is crucial to success. Real estate investors need access to fast, flexible funding, and that’s where mortgage brokers and third-party originators play a key role. By understanding the various loan options available for house flippers, brokers can better serve their clients, helping them secure the best financing for their investment projects.

If you're working with real estate investors looking to finance a fix-and-flip, it's essential to know the options and how to position them effectively. Here’s a guide to the most common loan options for house flipping and how brokers can leverage them to grow their businesses.

Traditional Bank Loans: Limited But Available

For some real estate investors, their first stop is a traditional bank loan. The process is similar to obtaining a conventional mortgage: the borrower selects a loan term, puts down a required payment, and secures financing at a standard interest rate. However, banks are often hesitant to approve loans for fix-and-flip projects due to the short-term nature of the investment and the risks involved.

As a broker, you can educate your clients on the strict credit requirements and the likelihood of rejection if they lack a history of successful flips. While a bank loan may work for some experienced investors with strong credit and financial history, most house flippers will need more flexible financing solutions.

Bridge Loans: Fast, Short-Term Financing

Bridge loans are a great short-term solution for investors who need quick access to capital. These loans are designed to provide temporary funding while waiting for a long-term financing solution. Brokers should position bridge loans as an ideal option for clients who need to close quickly on a deal or secure a property before permanent financing is arranged.

However, it's important to explain the risks. Bridge loans typically have higher interest rates and shorter repayment terms. If the long-term financing doesn’t come through, borrowers may find themselves in a tight financial position. As a broker, helping your clients navigate these risks with a clear exit strategy is key.

Hard Money Loans: A House Flipper’s Go-To Option

Hard money loans are among the most common financing tools for house flippers. Unlike traditional bank loans, hard money lenders focus more on the property's value and after-repair value (ARV) than the borrower’s credit score. This makes them a great choice for real estate investors who may not qualify for conventional financing.

For brokers, hard money loans present an excellent opportunity to provide value to clients who need fast funding with flexible underwriting. Since these loans are asset-based, investors can often secure financing even if they have limited cash reserves or credit issues. While the interest rates are higher than traditional loans, the quick approval process and short-term nature of the loan make it an attractive option for fix-and-flip investors.

Home Equity Loans: Tapping Into Existing Assets

Some experienced investors may consider using a home equity loan to finance their flips. This option allows them to leverage the equity in their primary residence to secure funding without any major effects on their mortgages. While home equity loans generally offer lower interest rates than hard money loans, they require borrowers to put their own home’s equity at risk.

As a broker, you can guide clients through the pros and cons of this approach, helping them determine whether leveraging their home equity is a smart move based on their financial situation and risk tolerance.

How Mortgage Brokers Can Help Real Estate Investors

Brokers and third-party originators play a crucial role in the fix-and-flip market. Investors rely on financing solutions that are fast, flexible, and tailored to their needs. By partnering with the right lenders and understanding these loan options, brokers can build lasting relationships with investors while expanding their business opportunities.

When working with real estate investors, focus on:

• Understanding their investment strategy and experience level
• Offering multiple loan options based on their specific needs
• Educating them on loan terms, rates, and risks
• Helping them secure financing quickly to stay competitive in the market

RCN Capital | Your Partner for Fix-and-Flip Financing

At RCN Capital, we specialize in providing short-term and long-term financing solutions for real estate investors. Our ARV loan program offers financing for up to 90% of the purchase price and 100% of renovation costs, with a cap at 75% of the after-repair value.

Understanding the loan options available for house flipping is essential for brokers looking to serve real estate investors effectively. Whether it’s traditional bank loans, hard money financing, or bridge loans, offering the right solution at the right time can help investors succeed—and help brokers build strong, profitable relationships. If you're a mortgage broker, private lender, or referral partner looking to provide your clients with competitive fix-and-flip financing, RCN Capital is here to help. Contact us today to learn more about our programs and how we can work together to grow your business.