On a Texas fix and flip loan, the money you bring to closing is not a flat percentage of the purchase price — it is whatever is left after the lender applies two separate ceilings to a number that already includes your rehab budget. Fix and flip lenders size the loan against total project cost (purchase price plus renovation); NerdWallet's fix and flip loan guide says the maximum loan-to-cost depends on the lender, and that some lenders offer loans up to a 90% loan-to-cost or higher. The lender then caps the result at a percentage of after-repair value, a band The Motley Fool and Forbes put at 65% to 75%. Your equity is the gap between total project cost and the smaller of those two numbers, and on top of it sit origination points on the loan plus third-party closing costs that the Consumer Financial Protection Bureau puts at 2% to 5% of the purchase price. In the illustrative $320,000 Texas purchase worked through below, the after-repair-value cap and a funded interest reserve push real cash to close to roughly $120,760, or about 30% of a $400,000 project. Have a broker price your Texas flip against real lender terms
Why is a fix and flip down payment computed off cost instead of purchase price?
A fix and flip lender is funding two things at once — the acquisition and the renovation — so it sizes the loan against total project cost rather than the purchase price alone. NerdWallet's fix and flip guide illustrates the mechanic: on a $120,000 project ($100,000 purchase plus $20,000 rehab), an 80% loan-to-cost offer produces $96,000 in loan funds.
That single change of denominator is the reason "what's the down payment?" has no clean answer on a flip. A conventional purchase loan answers one question: what is this house worth today? A fix and flip loan answers two — what does the entire project cost, and what will the finished house be worth. The first question produces the loan-to-cost test, and the second produces the after-repair-value test described in the next section.
Because rehab is inside the denominator, your dollar equity moves whenever the scope of work moves, even if the purchase price never changes. Add $20,000 of scope to a deal underwritten at 80% loan-to-cost and the lender will advance $16,000 more, but you are still on the hook for the remaining $4,000. That is why an honest, contractor-bid rehab budget submitted up front changes your cash requirement more than negotiating a few thousand dollars off the purchase price does.
Loan-to-cost ceiling: lender-set — the maximum available depends on the lender, and some offer loans up to a 90% loan-to-cost or higher, per NerdWallet's fix and flip loan guide.
Typical term: six to 24 months, per NerdWallet's fix and flip loan guide — short enough that the exit, not the monthly payment, is what underwriting really tests.
How does the after-repair-value cap raise the cash requirement above the headline LTC?
The ARV cap is a second, independent ceiling on the loan: the lender will not advance more than a set percentage of what the finished house is expected to appraise for. When that ceiling lands below the loan-to-cost number, the ARV cap sets your loan and pushes the difference onto your side of the table.
The cap percentages are well documented. The Motley Fool reports that private and hard money lenders offering rehab loans typically cap the loan at 65% of ARV, and describes the widely used 70% rule — 70% of after-repair value minus repair cost equals the maximum offer price — while noting that some rehabbers or wholesalers will go as far up as 75% to 80% of ARV to have a competitive edge — an offer-price benchmark for the buyer, not a lender's maximum advance. A Forbes Real Estate Council post puts the lender ceiling at up to 75% of the property's after-repair value. Taken together, 65% to 75% is the realistic planning band, and 70% is a reasonable midpoint for a Texas single-family flip.
There is often a third ceiling too. Wikipedia's hard money loan entry notes that many hard money lenders will only lend up to 65% of the property's current value, which matters when you buy a distressed house far below its as-is appraisal — the as-is test can bind before either of the other two does. Whichever of the three produces the smallest number is your loan, and everything else is your cash.
Typical lender ARV cap: 65% to 75% of after-repair value — 65% typical for private and hard money rehab lenders per The Motley Fool, up to 75% per Forbes.
Aggressive offer benchmark some flippers use: 75% to 80% of after-repair value, which The Motley Fool describes as how far some rehabbers or wholesalers will go to have a competitive edge — a purchase price, not a loan amount.
Typical as-is LTV ceiling: many hard money lenders lend up to 65% of current value, per Wikipedia's hard money loan entry.
What lands on top of the down payment at a Texas closing?
Your down payment is only one line on the settlement statement, and three more categories land beside it: lender points charged against the loan amount, third-party closing costs charged against the purchase, and any reserve the lender requires you to fund at closing. Prepaid property taxes and insurance sit inside that third bucket.
| Deal input | Lender treatment | Cash impact |
|---|---|---|
| Purchase price ($320,000) | Enters total project cost for the loan-to-cost test | Sets the base your equity is measured against |
| Rehab budget ($80,000) | Added to cost, then held back and reimbursed by draw | Raises the loan but not the day-one advance; you float each draw |
| Total project cost ($400,000) | 80% loan-to-cost implies a $320,000 maximum loan | Would imply $80,000 of equity if LTC were the only test |
| After-repair value ($440,000) | 70% ARV cap implies a $308,000 maximum loan | Binding constraint here; adds $12,000 of equity over the LTC number |
| As-is value | Some lenders add a current-value test near 65% | Can bind on a deeply discounted purchase and add more cash |
| Origination points (2% of loan) | Charged against the $308,000 loan amount | $6,160 due at closing |
| Third-party closing costs (3% of price) | Title, survey, appraisal, escrow, recording, prepaid taxes and insurance | $9,600 due at closing |
| Interest reserve (six months) | Carved out of loan proceeds before the purchase advance | Cuts the advance by $13,000, so equity at closing rises to $105,000 |
Points are the origination charge expressed as a percentage of the loan. Wikipedia's origination fee entry puts them at 1.0% to 5.0% of the loan amount and notes both origination fees and discount points appear as lender charges on the settlement statement, which is to say they are cash, not something amortized away. The third-party bucket is the one the CFPB sizes: closing costs, excluding the down payment, typically run 2% to 5% of the home purchase price. The CFPB's separate explainer on mortgage closing fees lists the common ones as appraisal fees, tax service provider fees, title insurance, government taxes and prepaid expenses such as property taxes, homeowners insurance and interest until your first payment is due.
The interest reserve is the line most first-time flippers miss. Wikipedia's commercial mortgage entry notes that lenders may require borrowers to establish reserves at closing to fund specific items, including repair and capital expenditure expense and interest reserves. A reserve funded out of loan proceeds is not free money — it consumes part of your capped loan amount, shrinking the advance available for the purchase and increasing the wire you send on closing day. Texas lenders vary on whether they escrow a reserve or bill interest monthly; it is worth asking before you model the deal, and it is one of the terms worth comparing across the lender types covered in who lends on fix and flip projects in Texas.
Typical origination points: 1.0% to 5.0% of the loan amount, per Wikipedia's origination fee entry.
Typical third-party closing costs: 2% to 5% of the purchase price, per the Consumer Financial Protection Bureau.
Typical hard money rate band: as low as 6% and as high as 14% or more, per Wikipedia's hard money loan entry.
A worked Texas example: $320,000 purchase, $80,000 rehab, $440,000 ARV
This illustrative Texas deal uses a purchase price below the statewide median listing price of $359,990 recorded for August 2026 in FRED's Texas housing inventory series, an $80,000 rehab budget, and a $440,000 after-repair value. Every percentage applied below comes from a cited source; the dollar figures are an example, not a quoted term sheet.
Start with the two ceilings. Total project cost is $320,000 plus $80,000, or $400,000. At 80% loan-to-cost — the figure NerdWallet uses in its own worked example — the maximum loan is $320,000. At a 70% ARV cap, sitting in the middle of the 65% to 75% band reported by The Motley Fool and Forbes, the maximum loan is 70% of $440,000, or $308,000. The lender takes the lesser of the two, so the loan is $308,000, and the ARV test has just cost you $12,000 more equity than the headline loan-to-cost number implied.
Now split that loan into what actually funds at closing. The $80,000 rehab sits in a holdback and is released by draw, and the lender carves out a $13,000 interest reserve — roughly six months of interest-only payments at 12%, inside the 6% to 14% band Wikipedia reports for hard money, on a $215,000 advance. That leaves $308,000 minus $80,000 minus $13,000, or $215,000, funding toward the purchase. Against a $320,000 price, your equity at closing is $105,000.
Add the transaction costs. Two points on the $308,000 loan is $6,160, inside the 1.0% to 5.0% origination range. Third-party closing costs at 3% of the $320,000 purchase price — the middle of the CFPB's 2% to 5% range — come to $9,600, and that bucket is where prepaid property taxes and the vacant-property or builder's-risk insurance premium land.
Total cash to close (illustrative): $105,000 equity plus $6,160 in points plus $9,600 in closing costs equals $120,760. That is about 30% of the $400,000 project and roughly 38% of the purchase price — more than $40,000 above the $80,000 a "20% down at 80% LTC" headline would have led you to budget.
What happens if the ARV appraisal comes in light?
An ARV that lands below your underwriting assumption shrinks the loan by the cap percentage times the miss, and almost all of that shortfall converts directly into additional cash you have to wire at closing. In the example above, a $30,000 ARV miss costs roughly $20,600 in extra cash.
Here is the arithmetic. If the appraiser signs off at $410,000 rather than $440,000, the 70% cap produces a $287,000 loan instead of $308,000. Holding the $80,000 rehab holdback and the $13,000 reserve flat, the purchase advance falls to $194,000, so equity at closing climbs from $105,000 to $126,000. Points drop slightly, to 2% of $287,000, or $5,740. Closing costs are tied to the purchase price and do not move. Total cash to close becomes $126,000 plus $5,740 plus $9,600, or $141,340 — about 35% of project cost.
The sensitivity is close to linear and easy to carry in your head: every dollar of ARV miss costs you roughly the cap percentage in extra cash, less a small offset from the lower point charge. At a 70% cap, a $30,000 miss is $21,000 of loan, minus $420 of points, or $20,580 more out of pocket. That is why the ARV comparables you submit, and whether the lender orders its own appraisal from a licensed appraiser, are worth as much attention as the rate. Underwrite the deal at the low end of your comp range, not the top, and keep the difference in reserve.
How do rehab draws change your peak out-of-pocket cash?
Rehab money on a fix and flip loan is almost never handed over at closing; it sits in a holdback and is reimbursed in draws after the work is inspected, so you float each stage of construction before the lender repays you. That float is real cash on top of your down payment.
Cash to close is therefore the minimum you need, not the maximum. If your first draw covers $20,000 of demolition and framing, you pay the contractor, request an inspection, and wait for reimbursement — so peak out-of-pocket on the illustrative deal is closer to $141,000 than $120,760, and it stays there until the draw clears. Stack two overlapping trades and the float grows. The mechanics, inspection triggers and typical reimbursement timelines are covered in detail in how fix and flip loan draw schedules work.
Carrying costs run in parallel. With terms typically six to 24 months per NerdWallet, and Texas property taxes and vacant-property insurance accruing the whole time, a flip that slips a quarter consumes reserve the down payment calculation never captured. If the lender did not escrow an interest reserve, monthly interest is another line you fund yourself. Budget a contingency on top of cash to close — and size it against the schedule, not the purchase price.
The bottom line
Treat "down payment" as shorthand for a calculation, not a percentage. Model total project cost, apply the loan-to-cost band, apply the ARV cap, take the lesser, subtract the rehab holdback and any interest reserve to find the real day-one advance, then add points and closing costs. Run the same model with the ARV 5% to 10% light and confirm you can still close.
That is also the comparison worth shopping. Two Texas lenders quoting the same rate can differ by tens of thousands of dollars in cash to close purely on where they set the ARV cap, whether they escrow interest, and how quickly they reimburse draws. YieldStack matches a submitted deal against 20,000+ loan programs and typically returns 5–8 matches per deal, with a median offer in under an hour, from an institutional lender. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
YieldStack is a commercial mortgage brokerage, not a lender. It does not originate loans or extend credit, and the loan programs it presents are offered by third-party lenders subject to their own underwriting. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
All dollar figures in this article are illustrative and built from the cited percentage ranges. They are not a quote, a term sheet, or a prediction of what any lender will offer on your deal.