Hard Money Loan FAQs
Straight answers to the questions real estate investors ask us most.
What is a hard money loan?
A hard money loan is a short-term real estate loan provided by a private lender — not a bank or credit union. The loan is secured by real property, and approval is based primarily on the value of that property and the strength of your investment plan, rather than your credit score or personal income. Hard money loans are most commonly used for fix-and-flip projects, new construction, bridge situations, and investment property acquisitions where speed is critical.
How is a hard money loan different from a bank loan?
Bank loans are underwritten primarily on the borrower — your income, credit score, employment history, debt-to-income ratio, and tax returns. Hard money loans are underwritten primarily on the property and the deal itself. Banks take 30-60+ days to close. Hard money can close in 5-14 days. Banks want properties in good condition. Hard money lenders fund distressed and partially constructed properties. Banks offer lower rates. Hard money costs more but provides speed and flexibility that banks cannot match.
Can I qualify for a hard money loan with bad credit?
Yes. Your personal credit score is reviewed but rarely the deciding factor. Lenders care far more about the property value, the equity in the deal, and your exit strategy. Investors with bankruptcies, foreclosures, or low credit scores are funded regularly when the deal is solid. A larger down payment — putting more skin in the game — can also offset credit concerns for lenders.
What property types do you fund?
We fund single-family homes, 2-4 unit multi-family properties, larger apartment buildings, mixed-use properties, light commercial real estate, and vacant land with a development plan. We do not fund owner-occupied primary residences with hard money products, as those require different regulatory compliance.
What is LTV and ARV, and why do they matter for hard money?
LTV stands for loan-to-value — the ratio of the loan amount to the property value. ARV stands for after repair value — what the property will be worth once renovations are complete. Hard money lenders typically lend up to 65-75% of ARV. For example, if a property will be worth $400,000 after renovations, a lender might offer up to $280,000-$300,000. This ensures there is enough equity in the deal to protect the lender if the borrower defaults.
How much does a hard money loan cost?
Hard money loans are more expensive than conventional financing. Interest rates typically range from 9% to 13% or higher depending on the deal, lender, and borrower experience. Lenders also charge origination points — typically 1-3 points (1 point = 1% of the loan amount). These costs are factored into your deal's projected profit margin when you evaluate whether the project makes sense financially.
How long are hard money loan terms?
Most hard money loans have terms of 6 to 24 months. Fix-and-flip loans are typically 6-12 months — enough time to complete renovation and sell the property. Bridge loans might run 6-18 months. New construction loans can go up to 24 months. Most hard money loans are interest-only during the term with the principal due at the end (the balloon payment), which is repaid when you sell or refinance.
What happens if I cannot repay the hard money loan on time?
Most lenders offer extension options if you are close to completion but need more time — typically for an extension fee. If you cannot complete the project or repay the loan, the lender has the right to foreclose on the property. This is why entering a hard money deal with a realistic exit plan and adequate contingency budget is critical. We discuss exit strategy risks with every client before placing a loan.
Do I need experience as a real estate investor to qualify?
Not necessarily. First-time investors are considered, especially for straightforward single-family fix-and-flip deals with clear numbers and a realistic scope of work. More experienced investors typically receive better rates and terms and face fewer documentation requirements. Partnering with an experienced investor or contractor can also strengthen a first-time borrower's file.
Can I use a hard money loan to refinance a property I already own?
Yes. Cash-out refinancing and rate-and-term refinancing of investment property using hard money is common. If you own a property with equity and need access to that equity quickly, a hard money refinance can close much faster than a conventional refinance — useful if you are using the proceeds to fund another deal or cover renovation costs.
Have a deal to discuss?
Submit your deal details and we will give you a fast honest answer on whether we can fund it.