518-791-9771 Get Started
Finance

How Does a Rehab Loan Work?

May 25, 2022 · 3 min read

The business of house flipping is not cheap. If you are an investor planning to flip homes for profit, you will need a huge amount of cash. This is where a rehab loan comes in. Usually, rehab loans come with reasonable rates, making this a good venture. Take a look at these three types of rehab loans and how they work.

FHA 203(k) Permanent Rehab Loan

This type of loan is ideal for someone who wants to remodel a house for their use or hang on to it for a while and then sell. Federal Housing Administration (FHA) 203(k) loans have low-interest rates and longer repayment periods. Note that the cost of the home remodeling project needs to be not less than $5000. There are also things you cannot do with an FHA loan, such as :

Minor landscaping renovations

Any project that is expected to take more than six months

Adding luxurious facilities or amenities like a tennis court or swimming pool.

Investment Property Line of Credit

This type of loan is best for an investor that owns a property and wants sustained access to credit. Investment property lines of credit are similar to home equity lines of credit. You can borrow a certain percentage of the property’s equity and use it over and over whenever you need it. Because this type of loan is secured by the property, the interest rates tend to be lower with a longer repayment term.

Hard Money Rehab Loan

If you are having trouble getting a rehab loan, you can consider a hard money lender. Unlike traditional lenders who look at your income and credit score, hard money lenders factor in what can be used as collateral.

How to Qualify for a Rehab Loan

There are three things that lenders will look at before giving you a loan.

Credit score: To qualify for FHA 203(k) loans, you will need a credit score of 550 or 500

Real estate experience: Lenders want to be sure they are working with someone that has flipped houses before and made a profit

Income: You will also need a steady income.

Rexford Commercial Capital is a qualified lender offering rehab loans to real estate investors. Our clients include contractors, rehabbers, and real estate investors seeking funding to rehabilitate homes. Give us a call, and we will help finance your next rehab project.

By Rexford Commercial Capital

Related Posts

What Local Banks Look for in a Small Business Loan Application

Local banks evaluate more than credit score when reviewing a small business loan request. In many Capital District and Adirondack markets, lenders place high value on preparation quality and the borrower’s ability to explain the business model clearly.

A strong application usually starts with financial clarity. Banks want consistent historical performance and a believable path forward. That means up-to-date financial statements, recent tax returns, and a practical narrative connecting requested funds to measurable business outcomes.

Equipment Financing for Small Businesses in the Adirondacks

Equipment financing can be one of the most practical ways for Adirondack businesses to grow without draining operating cash. Whether the need is a service vehicle, heavy machinery, production hardware, or specialized tools, financing allows owners to match payment schedules to expected business use.

The first decision is typically loan versus lease. Loans are often preferred when long-term ownership is the goal. Leases can be attractive when preserving monthly cash flow is more important, or when technology replacement cycles are short. The right structure depends on utilization, accounting treatment preferences, and projected upgrade frequency.

Ready to Talk Financing?

Reach out however works best for you. We respond to all inquiries within one business day.