Frequently Asked Questions
Plain-English answers to the questions investors ask most.
How these loans and deals work
How does a fix-and-flip loan work?
A fix-and-flip loan is short-term financing to buy and renovate a property you plan to resell. It usually covers a percentage of the purchase price plus much of the rehab budget, with the rehab money released in stages (called draws) as work is completed and inspected. You typically pay interest only during the term and pay the loan off when you sell or refinance. Terms are short — often 6 to 18 months — because the plan is to get in and out quickly.
What is a DSCR loan?
DSCR stands for Debt-Service Coverage Ratio. It is a rental-property loan that qualifies the property’s income instead of your personal income. The lender looks at whether the rent covers the mortgage payment: a DSCR of 1.0 means rent exactly covers it, and above 1.0 means there is surplus. Because these loans lean on the property’s cash flow, they are popular with investors who do not want to document personal income the traditional way.
How do I determine the ARV (After-Repair Value)?
ARV is what the property will be worth once renovations are finished. The reliable way to estimate it is to pull three recent sold comparable sales — ideally within the last 90 days, within about a half-mile, with the same bedroom and bathroom count and similar square footage and finished condition. Average them, adjust for differences, and that is your ARV. If you have to stretch to find comps, your estimate is probably too optimistic.
How do I determine the budget for a flip?
Build it from a scope of work — a room-by-room list of everything you will do and what each item costs, using real contractor quotes or median local costs rather than guesses. Then add a contingency buffer, often 10 to 15 percent, for surprises. Do not forget holding costs (taxes, insurance, utilities, and loan interest while you own it) and selling costs. A budget that only works in a best-case scenario is a warning sign.
Is there a prepayment penalty on fix-and-flip or DSCR loans?
It depends on the product. Short-term fix-and-flip and bridge loans often have little or no prepayment penalty, since you are expected to pay them off quickly. Some DSCR loans carry a prepayment penalty for the first few years, frequently structured as a step-down (for example, 5 percent in year one, decreasing each year). Always ask your lender to spell out the exact prepayment terms in writing before you sign.
Do lenders pull hard or soft credit?
Many business-purpose lenders start with a soft credit pull for an initial review, which does not affect your credit score, and then do a hard pull once you are moving forward on a specific loan. At Central Lending, we pull soft credit for fix-and-flip, ground-up construction, and bridge loans. DSCR loans always require a hard credit pull.
Why is a background check required for these loans?
Investor and business-purpose loans usually include a background check because the lender is financing a business venture, not a primary residence, and you control the project and the funds. They are confirming there is no history, such as fraud or certain financial crimes, that adds risk to the deal. It is standard practice and not a mark against you personally.
Can I close the loan in my personal name?
Most fix-and-flip, bridge, and DSCR loans are business-purpose loans, so lenders often require you to close in a business entity, such as an LLC, rather than your personal name. At Central Lending, we lend only to a business entity, not to individuals in their personal name.
What qualifies me for a hard money loan?
Hard money and bridge loans are asset-based, meaning the deal matters more than your tax returns. Lenders generally weigh the property and its ARV, your down payment (your skin in the game), your experience level, your credit as a risk signal, and your cash reserves to carry the project. At Central Lending, there is no minimum credit score requirement, but we do review your credit and ask for explanations of any negative events.
What documents do I typically need for these loans?
The list varies by loan type, but it commonly includes the purchase contract, your entity documents (LLC paperwork), recent bank statements showing reserves, a scope of work and budget for rehab loans, property details and comps, and a photo ID. For rental loans specifically, the free DSCR Mortgage Document Checklist on the Downloads page walks through the full list.
Financing with Central Lending
Specifics about working with The Mortgage Vet at Central Lending.
Is Central Lending a broker or direct lender?
Central Lending is a direct lender.
How quickly can you close?
We can close most loans in 10 days or less. DSCR loans require a full appraisal and often take 3 to 4 weeks. In every case, the biggest variable is how quickly complete documents and a clear title come together.
What states do you lend in?
Central Lending lends in most U.S. states. We currently do not lend in Arizona, California, Idaho, Minnesota, Nevada, North Dakota, Oregon, South Dakota, Utah, and Vermont.
I have a property under contract and need to close fast — what should I do next?
Move on three things right away: gather your documents (start with the free DSCR checklist), get your business entity paperwork and recent bank statements ready, and line up your scope of work and ARV comps. Then book a call and we will map the fastest path to closing.
Educational information only — not financial, legal, tax, or investment advice.