Hard money lenders offer quick funding and are a great option for crisis or time-sensitive situations, but there’s a lot of misinformation on how they operate. Potential borrowers may struggle to understand the core points of interest in such deals, typically around hard money loan requirements and the application process. Some people also hesitate to take out non-traditional loans because they’re not quite sure what they’re getting themselves into.
Hard money lending is, in all fairness, a savvy and transparent funding concept operating beyond the red-tapism of banks. Our guide covers all crucial aspects you should know, including:
- What the requirements for a hard money loan are
- Where to get a hard money loan with convenient terms
Hard Money Loans for Beginners
A hard money loan is a type of asset-based financing where the borrower uses real estate or a similar valuable possession as collateral, which is the driving factor of the deal. Banks and other traditional lenders require collateral as well, but they rely on the financial position of the applicant to approve the loan, which is not the case with hard money lenders.
Traditional lenders evaluate a host of other factors to judge your ability to pay off the loan—like your credit history, tax returns, and employment status. Hard money lenders do not focus on those “other factors” as they’re 100% secured by the value of the asset. If you have something of value, say a piece of land, a self-occupied property, rented premises, or even an original Van Gogh painting, you can use it as collateral to get access to quick cash. You don’t have to own the offered property fully—having equity is enough.
Hard money loans have higher interest rates and shorter repayment windows than traditional loans because the risk (from the lender’s perspective) is greater.
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Why Opt for a Hard Money Loan?
Hard money lending offers a creative solution to regular borrowing problems. It’s a popular tool when:
- Time and convenience are of the essence—Banks take anywhere between 30 and 60 days to screen your application and finish the required due diligence before they approve or reject your loan request. Most hard money lenders get you the money within two weeks, making it a viable bridge financing option for time-sensitive deals. Once you’ve secured the immediate funding, you can easily arrange a refinancing solution later (if you qualify) in case you want to switch to a lower interest rate
- No other options are available—Banks don’t offer loans when applicants have a tax default, high debt-to-income ratio, low credit score, or similar. Taking a hard money loan is one of the few workable solutions you have in that case
- You want to invest rather than consume—Hard money loans are useful for business or investment opportunities like flipping houses or any other setup that won’t qualify for regular home mortgages because you’re not the final consumer
Hard money loans are mostly used for:
- Real estate transactions—be it residential or commercial properties
- Business operations (like asset or inventory purchases)
- Personal obligations (e.g., stopping a bank foreclosure)
For any hard money loan, the collateral influences the value you can borrow and, more importantly, whether you’re eligible to borrow.
How To Qualify for a Hard Money Loan—Eligibility Criteria Explained
Hard money lending businesses are operated by one or more private investors, usually as a solo venture, a company, or an agency. Since they’re not controlled by government-backed organizations, the qualification requirements can vary from lender to lender. While you usually don’t have to line up elaborate tax returns and income proof certificates, your eligibility depends on the deal you’re offering. Hard money lenders typically evaluate applicants on five aspects:
- Value of the collateral
- Down payment
- Repayment strategy
- Previous experience
Traditional lending institutions use your creditworthiness as part of the collateral, but for hard money loans, the property is the only fail-safe. Lenders need to dig into details like the:
- Current fair market value of the property
- Borrower’s equity share in the property
Generally speaking, your loan amount cannot exceed the current value of the property except when you’re flipping houses. In that case, you must present the renovation expenses and the estimated future market value of the upgraded property.
You don’t necessarily have to carry out the property appraisal on your own—the lender may order it once you submit the loan application.
Source: Timothy Eberly
Down Payment and LTV Ratio
Hard money lenders require you to arrange a larger down payment than banks, mostly because the deal is only backed by the property value. Asking borrowers to invest their own money also reduces the risk of default.
In most cases, the down payment commitment depends on the loan-to-value (LTV) ratio offered by the lender. LTV is the amount the lender is willing to loan you and is calculated as a percentage of the collateral value or current purchase price. You need to be able to meet the remainder, either by using your savings or asking for a personal loan within your network.
Here’s an estimate of the common LTV rates offered by hard money lenders:
|Type of Loan
|LTV Rate (Approximates)
|Fix and flip loan
|The lender may opt for the current or after-repair value (ARV). The LTV rate can be:
75%–85% of the current market value
60%–75% of ARV
|60%–75% of property value
|40%–75% of asset value
Depending on the logistics of the deal, the lender may not ask you to deposit the down payment to them—you must only assure them that you can meet the gap after you receive the loan amount.
The lender wants to know how you will repay the loan, usually within three years or less. You’d have to reveal whether you plan to resell the property for a profit, get a long-term refinance loan, or similar. The attractiveness of the deal determines if the lender wants to invest. Every deal would have different parameters to determine its desirability, but some lenders may ask you to present documents attesting to the future market value or rental value of the property, as the case may be.
If you’re taking a hard money loan for business purposes, the lender may also want to check your credit score and history of bankruptcy filed (if any).
Numerous real estate investors use hard money loans as a part of their business model. They have goodwill among a group of lenders and tend to get approved easily. If you’re new to hard money borrowing, the lender will typically take more time to conduct foolproof due diligence regarding your deal and personal reliability.
Source: Scott Graham
Your collateral property or asset paperwork needs to be solid to qualify for a hard money loan. Lenders will look for the legitimacy of your title deed, sale deed, construction activity approval, and other relevant documentation before passing your loan.
Keep in mind that we’ve only provided a basic blueprint of the requirements. Since it’s a private business scenario, the lender you choose determines the eligibility requirements and your overall borrowing experience.
Where To Get a Convenient Hard Money Loan—What To Check
Searching for a good hard money lender is a bit of a gray area—you need to find the perfect fit in terms of manageable requirements.
You can use a search engine or reach out to your realtor networks to find the top hard money borrowing options available in your area, but it’s still upon you to determine if a particular lender is right for you.
Source: Viacheslav Bublyk
When deciding on a lender, focus on the following parameters:
|What To Evaluate
|While hard money lenders are not predatory, choose those who offer:
Low interest rates (8%–15%)
Economical initial fee (for paperwork and other technicalities)
|Reputable hard money lenders have:
Quality service ratings
Good word-of-mouth publicity
|Hard money lenders offering quality service tend to have:
Fast closing times
Flexible approval rules
High tolerance for low credit scores
|Hard money loans are usually short-term loans (1–3 years). To evaluate an offer, you should look at:
Prepayment penalties—What happens if you pay off the loan early?
Foreclosure terms—What happens if you default?
All hard money lenders use penalties and foreclosure provisions, so look for ones that have lenient terms.
Find Lenders That Listen and Help—Try Hard Money Loan Solutions
Qualifying for hard money loans doesn’t have to be hard. At Hard Money Loan (HML) Solutions, the lenders prioritize helping clients on a lenient, transparent, and case-by-case basis. The approval criteria are simple—you are eligible for a loan if you have funds to meet the LTV gap, enough equity, and legit title deeds. HML Solutions doesn’t fuss over whether you’re new to hard money borrowing or have a less-than-ideal credit score. The primary goal of the HML team is to get you out of that sticky situation as long as backed up by viable collateral.
Apply today and tell HML Solutions about your situation—the in-house experts will assess your case and offer you the best-in-class, mutually beneficial hard money loan plan!
HML Solutions ticks all the right boxes in the industry and has a coveted 5-star rating on Google, complimented by great reviews. You can expect:
- Flexibility—HML Solutions is free from common bureaucratic lending restrictions and has the liberty to adopt a solution-centric approach and manage every case with the flexibility to serve you the best
- Quick approval—Applicants with paperwork in order can get a loan within three to five days. If not, the process can take up to ten days
- Full transparency—You’ll be in at every stage of the decision-making process at HML Solutions. The lenders are blunt with their Yes or No answers, so you’ll never waste time
- Commitment—HML Solutions won’t cop out from funding once your loan is approved
- Relationship-focused approach—The HML team builds and maintains great relationships with clients. In the odd case that they have to reject your application, they’ll do their best to suggest alternatives so you still get your problem solved
Source: Sebastian Herrmann
HML Solutions—Typical Hard Money Loan Terms and Services
HML Solutions works with all kinds of hard money loans in the U.S.—a few of which involve even non-real estate collateral.
The HML Solutions team offers you:
- Purchase loans
- Refinance loans
- Cash-out loans
- Rehab loans
- Foreclosures loans
- Acquisition loans
- Construction loans
- Commercial property loans
- Bridge loans
- Fix and flip loans
- Investment property loans
Refer to the table below to get an idea of the common loan terms:
|What HML Solutions Offers
|Up to 70% of the purchase price or asset value (whichever is lower)
|2 points or 2%
|3 days to 2 weeks
How To Apply for a Hard Money Loan With HML Solutions
Hard Money Loan Solutions has a straightforward application and approval process.
Here’s what it looks like:
- Fill out the online loan application form—You’ll be entering basic personal and collateral details (your info is super confidential and only used for evaluation)
- Discuss the deal via a phone call (an executive will call you soon after they receive your application)
- Go through the short approval process (the usual property appraisal details)
- Analyze the tailored terms and conditions the HML team offers
- Accept or reject the offer
Once the deal is confirmed, you’ll wait for HML’s legal partners to finish up the paperwork. Don’t worry about your eligibility—apply for a hard money loan with HML Solutions, talk to the executive, and enjoy a hassle-free and expedited service!
Featured image source: Kenny Eliason