Comparing Investment Property Loans
Investment Property Loans — A Practical Guide to Fast, Flexible Financing
Investment property loans are asset-backed financings that help investors buy, renovate, bridge, or hold real estate for business purposes. This guide breaks down the primary loan types investors use—hard money, DSCR, conventional, private money, bridge, fix-and-flip, commercial, and foreclosure bailout—so you can match financing to strategy, timing, and asset condition. You’ll see how lenders judge deals using loan-to-value (LTV), after-repair value (ARV), interest rate, term, and debt service coverage ratio (DSCR), and how those factors affect approval speed and paperwork. We map common use cases (quick purchases, rehabs, bailouts, long-term holds), present side-by-side comparisons for investor priorities, and outline clear next steps for time-sensitive transactions. Throughout, the emphasis is on equity-focused, fast-closing options and realistic timelines, plus how in-house underwriting and high-LTV programs can support rapid closings and bailout situations.
Main Types of Investment Property Loans
Investment loans span several asset-based approaches designed for buying, rehabbing, refinancing, or rescuing properties. Each product is driven by a different underwriting focus (borrower credit, property equity, or cash flow), comes with its own LTV/ARV limits, cost profile, and funding speed. Below are concise definitions and practical use notes for the primary loan categories so you can quickly identify which fit your timeline and risk tolerance.
When to Use Hard Money Loans
Hard money loans are short-term, asset-backed loans that lean on the property and its equity as primary collateral. Underwriting prioritizes current value and ARV over personal credit or tax returns. They’re a go-to for fix-and-flip projects, fast purchases, and emergency bailouts because approvals can hinge on equity and rehab plans. Expect higher interest rates, origination points or fees, short terms, and often interest-only payments. Typical documentation includes the purchase contract, scope of work, contractor estimates, and title evidence. When a lender underwrites in-house and focuses on equity, hard money deals can close in days—ideal for time-sensitive opportunities.
How DSCR Loans Work for Investors
DSCR loans underwrite based on a property’s ability to cover debt from its net operating income—the Debt Service Coverage Ratio (NOI divided by annual debt). They’re built for investors scaling rental portfolios because qualification depends on the asset’s income rather than full personal income documentation. Typical DSCR requirements run roughly 1.0–1.25, varying by lender and property type. Documentation centers on rent rolls, leases, and property-level P&L rather than personal tax returns, which can speed approvals and help experienced investors grow their portfolios. DSCR programs are especially useful for buy-and-hold strategies where steady rental income supports debt coverage and expansion.
Hard Money vs. Conventional vs. Private Money — A Quick Comparison
Knowing the trade-offs between hard money, conventional, and private money loans helps you match cost, speed, and documentation to deal urgency and strategy. Broadly: conventional lending favors borrower credit and offers lower rates and longer terms; hard money emphasizes property equity and speed at a higher cost; private money delivers flexible, negotiated structures to bridge gaps other lenders won’t.
Each loan category makes different compromises in underwriting, cost, and timing—choose based on whether you prioritize lowest cost or fastest, most adaptable funding.
| Attribute | Hard Money | Conventional | Private Money |
|---|---|---|---|
| Underwriting Focus | Property equity / ARV | Borrower credit & income | Negotiated, asset-based |
| Typical Speed | Days to 2 weeks | 30–60+ days | Days to weeks |
| Typical LTV | Moderate to high (project-dependent) | Lower (65–80%) | Varied, negotiable |
| Documentation | Purchase contract, scope, title | Tax returns, W-2s, appraisals | Flexible, customized |
| Ideal Use Cases | Flips, bailouts, quick purchases | Long-term holds, refinances | Complex structures, carry-backs |
Speed and flexibility often come at a higher rate or fee. The right product depends on whether your priority is lowest cost or fastest, most adaptable funding.
Hard Money vs. Conventional — Key Differences
The main differences are underwriting focus, timeline, and cost. Hard money relies on property equity and ARV projections and can close in days for borrowers with strong collateral even if documentation or credit is limited. Conventional loans rely on verified income and credit, require full appraisals and tax returns, and typically take weeks to months to close. Hard money costs more in interest and origination fees but delivers speed and flexibility; conventional loans offer lower rates and longer amortization for long-term holds. Example: a distressed flip usually fits hard money, while a buy-and-hold intended for permanent financing must meet conventional lending standards.
Why Private Money Is Flexible
Private money lets parties negotiate asset-based terms—second trust deeds, seller carry-backs, and hybrid structures—so you can craft solutions institutional lenders won’t. It often sits between hard money and retail banks on speed and documentation: nearly as fast as hard money but with bespoke terms that mirror the parties’ appetite for risk. Investors use private money for creative deal mechanics, portfolio growth, and situations where standard underwriting would block the transaction.
Fix-and-Flip Financing — How It Works and What to Expect
Fix-and-flip financing combines acquisition capital with a rehab line paid out as draws. Lenders use ARV to set combined LTV limits and release funds by inspection at predefined milestones; interest-only payments during the rehab period are common to keep carrying costs predictable. Key features include ARV-based caps, draw schedules, inspection requirements, contractor approvals, and a clear exit—sale or refinance. Efficient flip lenders prioritize fast approvals and reliable draw processes so rehabs stay on schedule, lowering holding costs and speeding turnaround.
Typical LTV and Terms for Fix-and-Flip Loans
Lenders evaluate two main metrics: purchase loan-to-cost and ARV-based combined LTV, which caps total exposure against projected post-rehab value. Typical ranges vary, but many hard-money programs offer up to about 85–90% of purchase price or 70–90% of ARV depending on rehab scope and borrower experience; seasoned investors may access higher ARV funding. Terms are usually short (6–18 months), with interest-only payments during rehab and draw disbursements tied to inspections. The table below summarizes common fix-and-flip features with a Fidelity Funding example.
Fix-and-flip loans combine acquisition and rehab capital with ARV limits to control total exposure.
| Loan Feature | Typical Range (Fix & Flip) | Fidelity Funding Example / Notes |
|---|---|---|
| Max ARV Funding | 70%–90% of ARV | Up to 90% LTV for experienced fix & flip deals noted |
| Term Length | 6–18 months | Short-term, interest-only typical |
| Draw Structure | Milestone inspections | Rehab draws released after inspection |
| Interest Structure | Interest-only common | In-house underwriting can speed draw approvals |
How Rehab Financing Drives Successful Flips
Rehab financing ties draw schedules to inspections so funds follow completed work and value uplift—protecting both borrower and lender while keeping contractors paid. A disciplined rehab plan includes a detailed scope, realistic budget with a contingency (typically 5–15%), contractor bids, and a timeline aligned with inspections to avoid funding delays. Common pitfalls—underestimating soft costs, skipping contingencies, or not scheduling inspections—are avoidable with clear lender communication and conservative ARV assumptions. Submitting contractor agreements, permits, itemized budgets, and clean title information shortens underwriting and helps keep the project moving toward sale or refinance.
Bridge Loans and Foreclosure Bailouts — When Timing Matters
Bridge loans and foreclosure bailout loans address urgent timing needs: bridge loans cover planned interim gaps, while foreclosure bailouts provide emergency capital to stop a default or cure delinquency. Bridge loans fill the gap between purchase and permanent financing or cover delays in permanent funding or sales. Foreclosure bailouts are fast, equity-driven products meant to stop foreclosure actions, pay arrears, or create a path to refinance or sale; underwriting focuses on available equity and the speed of required funds. Both require rapid underwriting and clear documentation to meet narrow timelines.
When to Use a Bridge Loan
Use bridge financing when timing gaps threaten a deal—delayed permanent financing, tight closing deadlines, or repositioning a property before a refinance or sale. Bridge terms are short (often 3–12 months) and pricing reflects their interim nature; costs vary with loan size, collateral, and lender appetite. Typical uses include securing a property while finishing entitlements or permits, buying under a tight contingency, or holding a property while arranging permanent financing. A clear exit plan—sale, refinance, or conversion to permanent debt—keeps bridge costs tactical rather than permanent.
How Foreclosure Bailouts Save Properties
Foreclosure bailout loans provide immediate capital to cure defaults, pay missed payments, and stop foreclosure timelines by presenting a funded cure plan backed by clear collateral valuation. Timing is critical: lenders must move within the foreclosure timeline (notice of default, reinstatement period, impending sale) and need fast documentation like mortgage statements, title reports, and a payoff or refinance plan. These deals are usually equity-based and can be structured to pay arrears, refinance into a short-term loan, or enable a quick sale. The lender’s ability to underwrite and fund in days often determines whether the bailout succeeds. Done right, a bailout converts immediate risk into a managed transaction with a clear exit path.
Key Factors to Compare When Choosing a Loan
Picking the right investment loan means comparing a short list of critical attributes—LTV and down payment, interest rate and fees, approval speed and documentation, credit and equity expectations, and eligible property types. Laying these side-by-side helps you balance immediate needs against long-term cost and operational fit. The table below shows representative ranges for investor-focused attributes; use it to match your deal to the optimal product.
Compare core loan attributes to identify the best funding path for your deal.
| Loan Type | LTV | Rates | Speed | Typical Docs |
|---|---|---|---|---|
| Hard Money | 60–90% (varies) | Higher (short-term) | Days–2 weeks | Purchase, scope, title |
| DSCR | 65–80% | Moderate | 2–4 weeks | Rent rolls, P&L, leases |
| Conventional | 65–80% | Lower | 30–60+ days | Tax returns, credit |
| Private Money | Negotiated | Variable | Days–weeks | Negotiated, flexible |
How LTV and Down Payment Requirements Differ
LTV and down payment expectations vary by product: conventional loans usually require lower LTVs and more documentation but offer lower rates, while hard money and private lenders may accept higher LTVs tied to ARV or borrower experience. Seasoned flippers can sometimes access higher ARV-based funding; bailout or bridge scenarios may allow aggressive LTVs if equity and timing are clear. Down payment needs reflect purpose—short-term rehab or bridge loans often require more up-front equity, while long-term conventional loans spread risk across full underwriting. Know whether your lender uses purchase-price LTV, combined LTV with rehab, or ARV-based limits to determine how much capital you’ll need to close.
Typical Interest Rates, Fees, and Terms
Rates and fees drive total cost: conventional loans generally offer the lowest rates with longer amortizations; DSCR sits in the middle; hard money commands higher rates and upfront points for speed and flexibility. Common fees include origination points, appraisal and inspection costs, title and escrow charges, and sometimes servicing or exit fees. Interest-only structures and short balloon terms are common for flips and bridges. Typical durations vary: rehab loans (6–18 months), bridge loans (3–12 months), DSCR/commercial (1–10+ years), and conventional mortgages for long-term holds. Always calculate carrying costs and exit strategy to compare true financing costs across options.
Approval Speed and Documentation: What to Expect
Approval speed ties directly to documentation depth and who owns underwriting. Equity-focused or in-house underwritten loans can produce approvals in 24 hours and close in 5–7 days when documents are ready; conventional loans relying on third-party appraisals and full income verification can take several weeks. Fast, equity-based submissions typically need purchase agreements, contractor bids, title reports, photos, and proof of equity; DSCR loans center on rent rolls, leases, and property P&Ls. Clear scopes of work, organized bids, and clean title reduce friction and accelerate funding—especially when lenders control appraisal and title processes internally.
Credit Score and Equity Expectations
Credit requirements vary: conventional loans generally require stronger scores and verified income, while hard money and private lenders may approve borrowers with lower FICO if the property equity or ARV is compelling. Equity can offset credit weaknesses—larger down payments or conservative ARV assumptions improve approval odds. DSCR and P&L-based programs reduce reliance on personal credit by focusing on property performance, letting operators expand without traditional income documentation. If credit is a concern, present strong collateral, conservative ARV estimates, and a clear exit plan to strengthen your case.
Eligible Property Types and Occupancy Rules
Most investor lenders finance single-family residences (SFR), multifamily, mixed-use, and some commercial assets, with rules that vary by occupancy and business-purpose requirements; raw land and specialized real estate often face extra scrutiny. Eligibility depends on lender policy and loan size—some lenders focus regionally (for example, California) and deploy nationwide for larger loans above certain thresholds. For business-purpose lending, documentation and occupancy rules differ by product and jurisdiction. Confirm geographic eligibility and loan-size minimums with your lender, and provide clear property photos, leases, and title history to speed underwriting.
Why Fidelity Funding?
Fidelity Funding serves investors who need fast, equity-focused financing. We offer a range of short-term and commercial hard money programs backed by in-house underwriting and rapid timelines. When documentation and equity are clear, we can provide approvals in as little as 24 hours and fund in 5–7 days. Our product set includes hard money purchase loans, fix-and-flip financing, cash-out refis, bridge loans, DSCR and commercial hard money, foreclosure bailouts, construction and land loans, and longer-term hard money solutions. We emphasize property equity and ARV in underwriting rather than relying solely on credit or tax returns, enabling flexible approvals for time-sensitive deals across California and nationwide for loans $1,000,000 and above.
How Fidelity Funding Moves Quickly
We use in-house underwriting to keep decisions fast and predictable. A clean submission—purchase contract, scope of work or rent rolls, and proof of title—can produce an initial approval in as little as 24 hours and close in 5–7 days when conditions are met. Our process follows clear steps: submit the deal, underwriting review, conditional approval, and funding, all accelerated by direct communication and internal control of appraisal and title workflows. Prioritizing property equity and ARV reduces dependency on lengthy external verifications. For the fastest results, provide organized documentation, realistic ARV assumptions, and a clear exit plan to match our operational strengths.
Flexible Loan Programs We Offer
Fidelity Funding’s programs are asset-based and tailored for investor needs: hard money purchases, hard money refinance and cash-out loans, fix-and-flip loans with rehab draws, bridge financing, commercial hard money, DSCR loans, foreclosure and bankruptcy bailouts, seller carry-back arrangements, land and construction loans, and long-term hard money options. Each program targets a specific use case—ARV-driven rehab lending for flips, bridge funds for timing gaps, and DSCR or commercial terms for income-producing assets—while allowing structures that align with your exit plan and property details. Our in-house underwriting and program breadth enable solutions for complex or urgent transactions.
The Advantage of Equity-Based Underwriting
Equity-based underwriting weights approval on the property’s value and ARV, letting borrowers with strong collateral—but imperfect credit or non-traditional income—access timely funding. This is valuable for competitive purchases, rehab projects, and bailouts because it limits lengthy personal income verification and emphasizes measurable collateral metrics. For example, a high-ARV flip with clear contractor bids and contingency reserves can qualify quickly under equity-first criteria even when conventional documentation is limited. Equity-based underwriting also supports flexible structures—seconds, carry-backs, and tailored exits—that align financing with project economics.
Transparent Terms and Prepayment Policies
We disclose fees clearly and, for many short-term products, do not impose prepayment penalties—helping borrowers plan exits without surprise costs. Typical fees include origination points, inspection charges, and standard closing costs, all detailed during underwriting. Borrowers should review loan documents for exact fee schedules and confirm prepayment policies for their program, since terms can vary by product and loan size. Our focus on clear communication aims to remove ambiguity about rates, fees, and term lengths. For precise terms on your deal, submit a proposal or contact our team to receive a program-specific term sheet.
Frequently Asked Questions
What is the difference between bridge loans and foreclosure bailout loans?
Bridge loans provide temporary financing to cover planned gaps—like moving from purchase to permanent financing—so deals don’t stall. Foreclosure bailout loans are urgent, short-term solutions that provide capital to cure defaults and prevent foreclosure. Both require quick underwriting and documentation, but their purposes, timing, and exit expectations differ.
How can investors determine the best loan type for their needs?
Start by defining your objective, timeline, and exit plan. Consider LTV, rates, approval speed, and documentation needs. If speed is critical, hard money may be best; if long-term cost matters, conventional might fit. Property type and occupancy also affect eligibility. Match the loan to your strategy and timeline for the best outcome.
What are the typical costs associated with investment property loans?
Costs include interest, origination fees, appraisal and inspection charges, title and escrow fees, and possible servicing or exit fees. Hard money typically carries higher rates and upfront points for speed; conventional loans have lower rates but more paperwork. Always total carrying costs—including interest-only periods or balloon payments—when comparing options.
What documentation is generally required for investment property loans?
Documentation varies by product. Hard money often needs the purchase contract, scope of work, and title evidence. Conventional lending requires tax returns, W-2s, and appraisals. DSCR loans focus on rent rolls, leases, and property-level financials. Knowing required documents up front streamlines applications and improves approval odds.
How do lenders assess the risk of investment property loans?
Lenders measure risk with LTV ratios, DSCR, and ARV projections, plus borrower credit and income when relevant. Hard money lenders emphasize property equity and projected value; DSCR lenders emphasize income generation. These assessments determine eligibility and pricing.
What strategies can investors use to improve their chances of loan approval?
Present strong collateral, organized documentation, and realistic ARV estimates. Provide a clear exit strategy—sale or refinance—and address credit issues proactively. Demonstrating experience and a conservative budget or contingency reserve helps. Working with lenders experienced in equity-based underwriting can also improve approval odds for time-sensitive deals.
Conclusion
Choosing the right investment loan strengthens your ability to buy, renovate, and profit from real estate. By understanding each loan type and its trade-offs, you can pick financing that fits your strategy and timeline. If you have a time-sensitive deal or need a tailored solution, explore our programs or contact our team—we’ll help you find practical, fast financing that keeps your project moving.
