Requirements at a Glance
Lenders evaluate qualification across three independent boxes: the property fundamentals, the borrower and sponsorship profile, and the business plan or use of proceeds. A single failure in any box can derail a deal even when the other two are strong.
| Category | Requirement | Detail |
|---|---|---|
| Property | As-is LTV | Maximum 60 to 70 percent of current appraised or lender-determined as-is value |
| Property | After-repair value LTV | Maximum 65 to 75 percent of ARV supported by comparable sales and a detailed scope of work |
| Property | Asset condition | Property must be insurable and structurally sound enough to secure title insurance; condemned or environmentally impaired properties are declined |
| Property | Market location | Primary and secondary markets preferred; rural and tertiary markets face tighter LTV haircuts or outright declines |
| Borrower | Equity at closing | Minimum 25 to 40 percent cash equity into the transaction, verified prior to funding |
| Borrower | Credit score | 550 to 600 FICO minimum from the primary guarantor; some lenders will review below 600 with strong equity cushion |
| Borrower | No active foreclosure or bankruptcy | Active bankruptcy or pending foreclosure on any asset typically triggers automatic decline; discharged bankruptcy 2 to 3 years prior may be acceptable |
| Borrower | Personal financial statement | Current PFS showing net worth and liquidity; lenders want to see enough liquidity to fund carrying costs and contingencies |
| Business Plan | Exit strategy | Specific written plan for repayment: refinance into bank or agency permanent, sale, or construction completion triggering a take-out |
| Business Plan | Rehab scope and budget | Line-item renovation budget with contractor bids if ARV is being used to support the loan amount |
| Business Plan | Realistic timeline | Exit must be achievable within the loan term; lenders underwrite whether the property can reach bank-financeable condition before the hard money term expires |
| Documentation | Purchase contract or current ownership evidence | Fully executed purchase and sale agreement for acquisitions, or current deed and title report for refinances |
Documentation You Will Need
Sponsors who arrive at term sheet stage with these documents in hand close 1 to 2 weeks faster than those who scramble during due diligence.
- Fully executed purchase contract or deed evidencing current ownership
- Borrower personal financial statement (PFS), dated within 60 days
- Schedule of real estate owned with outstanding debt balances and payment status
- Government-issued ID for all guarantors and key principals
- Entity formation documents: operating agreement, articles of organization, certificate of good standing
- Property photos covering exterior, interior, and any visible deferred maintenance
- Broker price opinion (BPO) or recent appraisal if available (lender will typically order own)
- Detailed scope of work and line-item rehab budget with contractor bids for fix-and-flip or value-add deals
- Proof of funds for down payment and closing costs, typically 30 to 60 day bank statements
- Title commitment or preliminary title report
- Hazard insurance binder naming the lender as mortgagee
- Written exit strategy memo: specific refinance plan or sale strategy with comparable market data
What Qualifies You
These are the factors that materially improve qualification odds and pricing.
Low LTV relative to as-is value
Hard money lenders price and approve deals primarily on the equity cushion in the collateral. A deal at 55 percent as-is LTV will close faster, at lower rate, and with fewer conditions than one pushing 70 percent. Every additional point of equity below the maximum LTV reduces lender risk and often reduces rate by 50 to 100 basis points.
Specific and credible exit strategy
Lenders underwrite whether the borrower can actually repay within 6 to 24 months. A deal where the exit is a conventional refinance after stabilization is stronger than a vague plan to sell. Providing comparable stabilized cap rates, a letter of interest from a permanent lender, or active sale comps materially improves approval odds.
Documented rehab experience for fix-and-flip deals
Borrowers with a track record of completed rehab projects on similar asset types get approved faster and priced tighter. First-time fix-and-flip borrowers can still qualify but may face lower LTV limits on ARV and stricter draw inspection requirements.
Clean title and insurable property
Hard money lenders fund against the collateral, so clear title and the ability to obtain a standard ALTA lender title policy are non-negotiable. Properties with title defects, mechanic's liens, or active IRS tax liens require resolution before or at closing.
Liquidity to cover carrying costs and contingencies
Hard money rates of 9 to 13 percent and origination fees of 2 to 4 points mean monthly carry is significant. Lenders want to see that the borrower has enough liquid reserves, outside the down payment, to cover interest payments and rehab cost overruns for at least 6 months without selling the asset.
Property in a market with active comparable sales
ARV-based lending requires the lender to be confident the after-repair value is achievable and liquid. Markets with recent comparable closed sales at or above the projected ARV support higher advance rates. Thin or declining markets prompt LTV haircuts of 5 to 10 percentage points.
Speed and certainty of close as a negotiating factor
Hard money is priced partly for speed. Borrowers who come to the table with documentation organized, entity formation complete, and proof of funds ready shorten close timelines from 14 days to 7 days or fewer. Sellers of distressed assets often accept slightly lower prices for a hard money buyer who can close in 7 to 10 days versus a conventional buyer at 45 to 60 days.
What Disqualifies You
Common decline reasons that surface during underwriting. Most can be addressed with structuring or by routing the deal to a different program.
LTV exceeds program maximums
Hard money lenders have absolute LTV ceilings of 70 percent as-is or 75 percent ARV. Deals that require higher leverage to work are not candidates for hard money financing. Borrowers pushing maximum LTV with limited equity cushion are often declined outright or offered substantially lower proceeds.
Active bankruptcy or recent discharge within 2 years
An active bankruptcy filing prevents a clean lien from being recorded, making the deal legally unfundable in most cases. Discharged bankruptcies within the prior 2 years are a disqualifier at most hard money lenders, though some asset-based programs will consider deals 2 to 3 years post-discharge with significant equity.
Condemned, environmentally impaired, or uninsurable property
Hard money lenders require a standard hazard insurance policy and a title insurance policy. Properties that cannot be insured, have active EPA or state environmental orders, or are condemned by local authorities cannot serve as collateral regardless of the borrower's equity position.
No realistic exit strategy within loan term
A borrower who cannot articulate how the loan gets repaid within 6 to 24 months will be declined. Common disqualifying scenarios include properties needing more than 18 months of rehab with a 12-month loan, markets where bank take-out is structurally unavailable, or properties with title or zoning issues that will prevent conventional refinance.
Insufficient liquidity to carry the deal
Borrowers whose liquid assets are fully consumed by the down payment and closing costs present a high default risk to hard money lenders. Interest at 9 to 13 percent accrues monthly, and a borrower with no reserves to cover a rehab overrun or a delayed sale will default before exit. Most lenders require evidence of post-close liquidity covering at least 3 to 6 months of interest and project contingency.
Typical Qualified Borrower
If your situation matches one of these profiles, the program is likely a strong fit.
- Fix-and-flip investor acquiring a distressed single-family or small multifamily property below market and targeting a 90 to 180 day hold before sale
- Investor winning an auction purchase requiring a 10 to 30 day close where conventional financing is not possible
- Commercial property buyer closing quickly on an off-market distressed asset before conventional diligence timelines can be met
- Developer bridging a completed project from construction completion to permanent financing while lease-up is finalized
- Landlord repositioning a value-add multifamily property that does not yet qualify for bank or agency financing due to occupancy or condition
- Sponsor acquiring a note or REO asset that needs to be stabilized before a conventional or agency refinance is available
- 1031 exchange buyer needing to close the replacement property within a 45-day identification window where bank financing cannot execute in time
Timeline
Hard money loans typically close in 7 to 14 days from term sheet acceptance, which is the primary reason borrowers pay the rate and fee premium over conventional financing. The speed bottleneck is almost always title work, insurance binding, and entity document review, not the lender's credit process. Borrowers who arrive with a complete documentation package, entity formation verified, and a title company already engaged can close in as few as 5 to 7 business days.
Frequently Asked Questions
What LTV can I get on a hard money loan?
Hard money lenders typically advance 60 to 70 percent of as-is value for stabilized or lightly distressed properties, and up to 65 to 75 percent of after-repair value for fix-and-flip or rehab deals. ARV advances require a detailed scope of work and comparable sales supporting the projected value. Deals in thin or declining markets face LTV haircuts of 5 to 10 percentage points below those maximums.
Do I need tax returns to qualify for a hard money loan?
No. Hard money lenders underwrite the collateral asset, not the borrower's income. Tax returns are not required at most asset-based hard money programs. You will need a personal financial statement, proof of funds for the down payment, and entity formation documents, but personal income verification through tax returns is not part of the standard hard money underwriting process.
What credit score do I need for a hard money loan?
Most hard money lenders set a minimum FICO of 550 to 600, significantly below the 680 to 720 minimums common in bridge and bank permanent lending. Credit score is a secondary factor. Lenders are primarily focused on the equity cushion in the collateral and the exit strategy. A borrower with a 580 FICO and 40 percent equity will typically qualify where the same borrower would be declined for conventional financing.
How much does a hard money loan cost?
Hard money loans typically carry interest rates of 9 to 13 percent and origination fees of 2 to 4 points, paid at closing. On a $2M loan, that is $40,000 to $80,000 in upfront origination fees plus monthly interest of $15,000 to $22,000. The cost is the price of speed and flexibility. Borrowers who underwrite the deal correctly factor total hard money carry into their acquisition basis and exit profit margin.
Can I get a hard money loan on a commercial property, not just residential?
Yes. Hard money lending is active across commercial property types including multifamily, mixed-use, retail, industrial, and office. Commercial hard money typically carries slightly tighter LTV limits and higher minimums, with most lenders starting at $1M. The same asset-first underwriting logic applies: as-is or ARV value drives the loan amount, and the borrower's exit strategy drives approval.
What is the difference between hard money and bridge loans?
Hard money is a subset of bridge lending characterized by shorter terms of 6 to 24 months, higher rates of 9 to 13 percent, lighter borrower documentation requirements, and a primary focus on asset value rather than sponsor financials. Institutional bridge loans, by contrast, typically require full sponsorship financials, operating histories, and a demonstrated value-add track record, but offer lower rates of 7 to 10 percent and longer terms of 12 to 36 months.
How does the draw process work for rehab projects?
For fix-and-flip and value-add deals, hard money lenders typically fund the purchase at closing and hold rehab funds in a controlled draw account. Draws are released as construction milestones are completed and verified by a third-party inspector, usually within 3 to 5 business days of an approved inspection. Lenders generally allow 3 to 5 draws over the loan term, and the inspection fee of $150 to $300 is charged to the borrower at each draw.
What happens if I cannot exit the hard money loan before it matures?
Hard money loans mature in 6 to 24 months and do not automatically convert to permanent financing. If the borrower cannot refinance or sell before maturity, the lender can call the loan and begin foreclosure. Some lenders offer one-time extensions of 3 to 6 months for a fee of 0.5 to 1 point, but extensions are at lender discretion and are not guaranteed. Borrowers should underwrite their exit conservatively with at least 30 to 60 days of buffer before maturity.
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