Your down payment is only part of what you bring to closing. Underwriting, title, insurance and prepaid interest can add thousands more, so plan for them before you make an offer.
In short: Fix and flip loan closing costs usually include underwriting or processing fees, a valuation, title and escrow charges, insurance, legal or document fees and prepaid interest. Exact amounts vary by program, loan size and state. Title and insurance are often among the larger items, and prepaid interest depends on your rate, the amount funded at closing and your closing date. Your total cash to close is the down payment plus these costs, and you should hold reserves for monthly carrying costs on top.
Every lender itemizes costs a little differently, but most fix and flip closings include the same categories. The descriptions below are general, and amounts vary by program, loan size and location.
Ask for an itemized estimate early, then compare it to the final settlement statement before you sign.
| Cost | What it covers | How it is usually priced |
|---|---|---|
| Underwriting / processing | Reviewing the file and preparing the loan | Flat fee, varies by lender |
| Valuation | Appraisal or broker price opinion, including ARV | Flat fee, varies by property and market |
| Title and escrow | Title search, lender's policy, settlement fee | Varies widely by state and price |
| Insurance | Builder's risk or vacant property coverage | Annual premium, often paid up front |
| Legal / document fees | Loan document preparation and review | Flat fee |
| Prepaid interest | Interest from closing to the first payment date | Daily interest times days remaining |
| Recording and transfer | County recording, transfer taxes where applicable | Set by state and county |
Some costs are flat, such as underwriting, processing and document fees. Others grow with the deal. Title premiums and any transfer or recording taxes often rise with the price or loan amount, insurance rises with the property value and scope of work, and prepaid interest depends on your rate and how much is funded at closing.
Ask whether interest is charged on the amount funded at closing or on the full loan, including the rehab holdback. Some lenders also trade lower closing costs for a higher rate. Compare the full cost over your expected hold time, not one line item.
Title and escrow costs depend heavily on the state. Some states have transfer taxes or mortgage recording taxes, and some use attorneys for closings. Your title company can give you an estimate once you have a contract.
Insurance on a flip is usually builder's risk or a vacant dwelling policy rather than a standard homeowner's policy. The lender will require it to be in place at closing, with the lender named on the policy.
This example is illustrative and not a quote. An investor buys a property for $250,000 with a $60,000 rehab budget. The loan covers 90% of the purchase ($225,000) plus 100% of the rehab ($60,000), a total loan of $285,000. The down payment is $25,000.
Prepaid interest assumes a sample 10.99% rate on the $225,000 funded at closing for 15 days ($225,000 x 10.99% / 365 x 15 = $1,016.20). The other amounts are samples. Closing costs total $10,216.20, so cash to close is $35,216.20.
| Item | Amount |
|---|---|
| Down payment (10% of $250,000) | $25,000.00 |
| Underwriting and processing | $1,900.00 |
| Valuation | $750.00 |
| Title and escrow | $3,200.00 |
| Insurance premium | $1,800.00 |
| Legal / document fees | $900.00 |
| Prepaid interest (15 days) | $1,016.20 |
| Recording and transfer | $650.00 |
| Total cash to close | $35,216.20 |
Closing is not the last check you write. While you renovate and sell, you pay monthly interest, property taxes, insurance and utilities.
In the example above, once the full $285,000 is drawn, interest alone is about $2,610 a month. Add $300 in taxes and $200 in utilities and carrying costs are about $3,110 a month. Use our carrying costs calculator to model your own project.
You can't avoid closing costs, but you can manage them. Some purchase contracts allow seller credits toward closing costs, subject to the lender's rules. Experience can improve both pricing and leverage.
Shopping title and insurance, when your state allows, can also help. See our fix and flip down payment guide for how leverage changes the cash you need.
Request an itemized fee estimate with your term sheet, and ask which costs are paid at closing versus financed. Confirm the per-draw fee, since that cost shows up later.
Review the settlement statement a day or two before closing. If a number changed, ask why before you wire funds.
It varies by program, loan size and state. Title, insurance and lender fees for underwriting and processing are usually the larger items. Get an itemized estimate before you commit.
Some programs allow certain costs to be financed within leverage limits, but most borrowers pay them at closing. Ask how your program handles it.
Usually it is based on the amount funded at closing. On programs that charge interest on the full loan, it may include undrawn rehab funds. Confirm this on your term sheet.
Seller credits are sometimes allowed, subject to the lender's limits. They cannot usually be used toward your down payment.
It is interest from your closing date to the start of the first regular payment period, collected at closing. The amount depends on your rate, funded balance and closing date.
Enough to front the first rehab phase and cover several months of carrying costs. Lenders often check for reserves during underwriting.
2-3 competing quotes from 30+ capital sources. No credit pull. No commitment.
By clicking, you provide express written consent to be contacted by LendingStreet (NMLS #1734316) via SMS, phone, or email, possibly using automated technology, regarding your loan inquiry. Reply STOP to opt out. Consent is not required to obtain services. See our Privacy Policy and Terms.