The Quick Read: The down payment is the part of the project cost the lender’s leverage cap does not cover, and your real cash need is that gap plus fees, escrows, contractor deposits, and post-closing liquidity. Lenders size the loan against both project cost and after-repair value, and the lower result sets how much you bring.
- Across the network, fix-and-flip loans run up to 93% of project cost at 5+ completed projects, 90% at 2+, and 85% with fewer than 2, always capped at 75% of after-repair value.
- Bridge purchases without rehab run up to 80% of purchase price, so expect roughly 20% down before fees.
- Rehab funds release in draws against completed work. They are not cash at closing and not a down payment substitute.
- No true 100% purchase program exists. Leverage varies by lender, property, and experience, and nothing here is a commitment to lend.
What Is the Down Payment on a Hard Money Loan?
The down payment is your equity in the deal. Hard money is a short-term, asset-based loan for business-purpose, non-owner-occupied property. The lender cares most about the property, the plan, and the exit. That is why the loan is a percentage of value or cost, and you fund the rest.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Think of it as a gap. The lender sets a maximum loan. The project costs more than that. You pay the difference.
Two things make this different from a bank mortgage. First, the value basis can change. Some lenders size against purchase price, some against total project cost, and some against after-repair value (ARV). Second, there is no agency rule setting a standard percentage. Each lender and program sets its own terms.
Key Terms Defined
Project cost: The purchase price plus the rehab budget.
Loan-to-cost (LTC): The loan divided by project cost.
After-repair value (ARV): The appraiser’s estimate of what the property is worth once the work is done.
Equity gap: Everything in the project cost that the loan does not cover.
Cash to close: The money you wire at closing: equity gap plus fees and escrows, minus deposits and credits.
Draw: A release of rehab funds after the work is completed and inspected.
What Leverage Limits Does the Network Use?
Across the wholesale network, leverage is tiered by how many projects you have completed. The strongest tier is reserved for experienced investors. Figures below are typical and vary by lender, property, and experience.
| Deal type | Typical maximum leverage | Rough equity gap |
|---|---|---|
| Fix-and-flip, 5+ completed projects | 93% of project cost | About 7% of cost |
| Fix-and-flip, 2+ completed projects | 90% of project cost | About 10% of cost |
| Fix-and-flip, fewer than 2 projects | 85% of project cost | About 15% of cost |
| Bridge purchase, no rehab | Up to 80% of purchase price | About 20% of price |
| Cash-out or rate/term refinance | Up to 65% of value | About 35% of value |
Every fix-and-flip tier is also capped at 75% of ARV. Ground-up construction runs up to 90% of cost and 75% of completed value at 3+ completed projects.
Tiers step up with experience, so leverage depends on how many projects a borrower has completed. Borrowers with fewer completed projects should expect to land nearer the lower end of the leverage range.
Credit matters less than with a bank loan, but it still counts. A 620 score is the minimum, with additional conditions below 660. First-time investors qualify at the lower leverage tiers. Underwriting stays asset-based: property, plan, and exit.
How Do You Plan the Down Payment on a Hard Money Loan Step by Step?
Work the numbers the way the lender will. Do it before you make an offer, and again before the lender’s term sheet.
1. Add up project cost. Combine the purchase price and the full rehab budget.
2. Apply the cost-based cap. Use the tier that matches your completed projects.
3. Apply the ARV cap. Multiply your realistic ARV by 75%.
4. Take the lower result. That is the maximum loan.
5. Subtract the loan from project cost. That is your equity gap.
6. Add the fees and escrows. These sit on top of the gap.
7. Subtract anything already paid or credited. Earnest money and seller credits come off.
8. Add liquidity that stays in the bank. Reserves and contractor deposits sit outside the closing wire.
Here is a worked example using only percentages of project cost. These are illustrative modeled assumptions, not market data.
| Scenario | Cost-based cap | ARV cap as % of cost | Binding cap | Equity gap |
|---|---|---|---|---|
| A: 2+ projects, ARV is 1.30x cost | 90% | 97.5% | Cost-based | 10% of cost |
| B: 2+ projects, ARV is 1.10x cost | 90% | 82.5% | ARV | 17.5% of cost |
| C: fewer than 2 projects, ARV is 1.20x cost | 85% | 90% | Cost-based | 15% of cost |
Scenario B is the one that surprises investors. The borrower holds the same experience tier as in scenario A. The spread between ARV and cost is thin, so the ARV cap binds and the equity gap grows by 7.5 points of project cost. A thin spread means more cash from you.
Next, separate rehab money from the down payment. Rehab dollars usually fund in draws as work is finished. Up to 100% of the rehab budget can fund that way in the network, but that is a rehab-budget figure. It is not a purchase leverage figure. Contractors often want deposits before the first draw, so that cash comes from your own funds.
What Does Total Cash to Close Look Like?
Cash to close is the equity gap plus every cost that is not financed, minus deposits and credits. The down payment is one line of that formula, not the whole of it.
| Line item | Direction | Planning note |
|---|---|---|
| Equity gap | Add | Set by the lower of the cost and ARV caps |
| Origination and lender fees | Add | Quoted by the lender; varies by loan |
| Appraisal, title, inspection, document fees | Add | Many are fixed, so small loans feel heavier |
| Escrows and prepaids | Add | Often cannot be rolled into the loan |
| Earnest money already paid | Subtract | Must be documented |
| Seller credit | Subtract | Reduces cash only if the contract allows it |
Fixed fees deserve extra attention on small loans. A flat title or appraisal charge is the same on a modest balance as on a large one, so it eats a bigger share of a small deal. Loan amounts run up to $5,000,000, larger by exception, and smaller balances vary by lender.
The arithmetic mirrors what consumer buyers see. The CFPB’s explanation of the loan estimate shows cash to close as the down payment plus closing costs, less deposits and credits, and it stresses documenting where the funds come from. Hard money is a business-purpose loan, so those consumer disclosure forms do not apply to it. The logic still carries over.
Cash to close is also the real limit on how many deals you can run at once. A thin balance after closing leaves you exposed if a draw is slow or the scope grows. Interest-only carry, contractor deposits, and any reserve requirement all drain liquidity during the project. Some lenders verify post-closing cash, so ask early what your lender expects.
What Proof of Funds Will the Lender Ask For?
Expect to document both the amount and the origin of your cash. A typical file includes the purchase contract, a scope of work or rehab budget, recent bank or asset statements, title information, and entity documents if you buy through an LLC. Where an LLC is used, program eligibility is subject to lender guidelines, so confirm the vesting entity before any money moves.
Keep the money in an account where it can be traced. A large new deposit usually needs a paper trail, such as a property sale or an inheritance. Lenders vary on how long funds must sit before they count, so ask your lender rather than assuming.
Earnest money gets the same treatment. Fannie Mae’s selling guide on earnest money shows how conventional lenders verify a deposit and its source. A hard money lender will want a similar trail: a cleared check or wire that matches your statements.
Where Can the Down Payment Come From?
Savings are the cleanest source. Every other source adds a documentation step or a tradeoff.
| Source | How it works | Watch out for |
|---|---|---|
| Savings and liquid assets | Statements show the balance | Moving money late creates questions |
| Cash-out on another rental | Pulls equity from a stabilized property | Seasoning and leverage limits apply |
| Partners or pooled capital | Funds enter through the entity | Entity documents and clear ownership |
| Additional collateral | A few lenders will consider a second property | Raises your risk across both assets |
| Seller participation | A seller credit or a second lien behind the first | Lender must permit it |
Borrowed funds are the riskiest category. Some lenders limit or prohibit a borrowed down payment, so get the answer in writing before you rely on it.
A cash-out on a stabilized rental can also fund the next purchase. On a standard rental, select DSCR programs in the network top out around 75% LTV on a cash-out, with about six months of seasoning as the common expectation. A DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Clearing a 1.00 coverage ratio is where many select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Coverage compares rent to the full payment only, so it is not the same as positive cash flow after repairs, vacancy, and management.
How Can You Lower the Cash You Bring, and What Does It Cost?
Every lever has a price. Know it before you pull it.
- Complete more projects. Moving from the fewer-than-2 tier to the 2+ tier lifts cost-based leverage from 85% to 90%. That takes time, not paperwork.
- Negotiate the price. A lower purchase price shrinks project cost and widens the spread against ARV. This helps most when the ARV cap is the one binding.
- Ask for a seller credit. It reduces cash to close, but only if the contract and the lender allow it.
- Trim the rehab scope. A smaller budget lowers project cost. It may also lower ARV, so it can backfire.
- Offer extra collateral. It can cut cash up front. It also puts a second property at risk.
Be careful with the phrase 100% financing. In the market it usually means 100% of cost, still inside the ARV cap. The network has no true 100% purchase program. What exists is up to 100% of the rehab budget funded in draws, plus the cost-based tiers above. An investor who counts on zero cash will usually be short at the wire.
What Are the Edge Cases Where the Rule Breaks?
A purchase with no rehab. There is no rehab budget and no cost-based sizing. Bridge purchases run up to 80% of purchase price, so the down payment is often a bigger percentage than on a flip.
A cheap purchase against a high ARV. The cost-based cap binds first. Your gap is set by your experience tier, as in scenarios A and C.
A purchase near ARV. The ARV cap binds and your gap grows, as in scenario B.
A first-time investor. Lenders are more conservative with new investors, which keeps you at the lower leverage tiers.
A refinance. Cash-out and rate/term refinances run up to 65% of value, so the equity cushion is much larger than on a purchase.
Owner-occupied property. It is not offered. Collateral is non-owner-occupied residential, 1-4 units, with ground-up construction to 10 units.
A strong file in a restricted location. Availability varies by location, so confirm your property’s market before you plan the cash.
Brokers in this space see one pattern again and again. The investor plans for the down payment and forgets the contractor’s first deposit. The lender then wants verified cash behind the file, and the investor’s balance is thinner than the plan assumed. The files that go smoothly build a cash buffer into the plan from the start.
What Does the Pre-Closing Sequence Look Like?
Work through these stages in order. Each stage has its own cash need.
1. Contract. Earnest money goes down. Keep the receipt and the statement showing the withdrawal.
2. Term sheet. Confirm the leverage tier, the basis for sizing, and which fees are financed. Run the equity gap again.
3. Document gathering. Assemble statements, the scope of work, and entity documents. Resolve any large deposit before the lender asks.
4. Appraisal. The as-is and ARV values come back. This is where scenario B surprises appear.
5. Conditional approval. Review the final fee list and compare it to your cash plan.
6. Clear-to-close. Confirm the final cash-to-close figure and that the funds are in the right account.
7. Funding. Wire the exact amount. Hold back contractor deposits and reserves.
How Do You Stress-Test the Plan?
Test three failure points before you commit.
A low appraisal. Take scenario A, where ARV is 1.30x cost. If the appraiser lands at 1.17x cost, the ARV cap drops to 87.75% of cost. The cost-based cap was 90%, so the lower number now binds, and your gap rises from 10% to 12.25% of project cost. A 10% miss on ARV added 2.25 points to your equity gap.
Scope creep. A bigger rehab budget raises project cost. The equity gap rises with it, and the ARV cap may bind sooner. Hold a contingency inside your own cash, not inside the lender’s budget.
A moved closing date. If the closing date moves, check that your statements still show the funds and that no large unexplained deposit appeared.
Where Do Investors Go Wrong?
- Treating the down payment as the whole cash need. Fees, escrows, reserves, and contractor deposits add up.
- Assuming closing costs roll into the loan. Often they do not.
- Moving money at the last minute. A large deposit right before closing invites questions.
- Ignoring the exit. Terms run 6-18 months, interest-only, with no prepayment penalty. There are no multi-year options, so your sale or refinance plan needs to be set before you close.
- Over-reaching on leverage. A thin spread plus a thin cash buffer is a risky pairing.
On the exit, many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The complete DSCR loans guide explains how that financing works, including its own leverage, credit, and seasoning rules. Plan the hard money down payment so you still have cash left for the refinance side.
Frequently Asked Questions
Do I always need a down payment on a hard money loan?
Yes, in practice, because the network has no true 100% purchase program. Even the top tier funds up to 93% of project cost, which leaves an equity gap. Rehab dollars release in draws and do not replace cash at closing. Terms vary by lender, property, and experience.
Is the down payment based on purchase price or ARV?
Both matter, and the lower result sets the loan. Cost-based leverage applies to purchase plus rehab, and the loan is also capped at 75% of ARV. When the spread between ARV and cost is thin, the ARV cap binds and you bring more cash.
Can I borrow the down payment?
It depends on the lender, and many limit it. Lenders want to see where your cash came from, and borrowed funds raise questions about both source and risk. Ask in writing before you plan around it.
Does my earnest money count toward the down payment?
Yes, usually, as long as it is documented. It comes off your cash to close, but you need a receipt and a bank record that matches your statements. If the deal fails, the deposit may be at risk under the contract terms.
How early should I show proof of funds?
Assemble it by the time you request the term sheet. Statements, the contract, the scope of work, and entity documents are the core file. Clearing up any large deposit early prevents surprises later.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire is a mortgage broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. Fannie Mae Selling Guide B3-4.3-09: Earnest Money Deposit
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Hard Money Lender Cap Loan to Cost on a Flip? · Hard Money Bridge vs Private Money Down Payment for an LLC Buyer · Hard Money Loan Credit Reporting Rules for Personal Credit
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.