The Quick Read: A hard money pre-approval letter usually does not count your cash at all. It states the maximum the lender is prepared to lend on a deal, if conditions are met, while your own money is shown separately, usually with a bank statement.
- The letter states a maximum loan amount. It is not proof of the cash you hold.
- Only liquid, owned, accessible money counts as your funds: checking, savings, money market and CDs.
- Each dollar has one job: down payment, closing costs, early rehab spend, or reserves. It cannot do two.
- The letter is not a commitment. Appraisal, contract terms and sourced funds can change the number.
- Terms vary by lender, property, and experience, and nothing here is a commitment to lend.
What Is a Hard Money Pre-Approval Letter?
It says how much the lender is prepared to lend on a deal, assuming the file holds up. It does not hold, count or guarantee your cash.
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.
Three documents get confused, and mixing them up costs investors offers.
| Document | What it shows | Binding on lender? |
|---|---|---|
| Proof of funds | Money you already control | No |
| Pre-approval letter | A proposed maximum loan amount | No |
| Commitment letter | A lender’s obligation to fund | Yes, with conditions |
Bankrate treats proof of funds and a preapproval as separate documents. A preapproval, it explains, is a lender’s document showing a proposed loan amount for a given borrower. Proof of funds is the borrower’s side of the ledger.
The commitment letter is the only one of the three that obligates the lender to fund. A pre-approval is a step toward it.
How Does the Lender Actually Count Your Funds?
The lender does not hold your cash or add up your accounts into the letter’s number. It underwrites the deal and the borrower, then states a maximum loan. Your cash is the gap between that loan and the project cost.
That is the key to reading the letter. Hard money leverage is cost-based. On the network Lendmire works through, fix-and-flip leverage runs up to 93% of project cost for borrowers with 5+ completed projects, 90% of project cost at 2+ projects, and 85% of project cost with fewer than 2, with every tier capped at 75% of after-repair value. Bridge purchases without rehab run up to 80% of purchase price. All of it varies by lender, property, and experience.
So the funds the lender cares about are the cash portion left over after the loan. Take a flip at 85% of project cost: the investor needs the other 15% in verified liquid money, plus closing costs and a cushion. The letter states the loan side. The statement proves the cash side.
Practitioners disagree on how much weight an early letter carries. Some lenders treat a pre-approval and a proof-of-funds letter as nearly the same thing. Others hold that an early letter means little until credit is pulled, funds to close are sourced and the appraisal clears review. The safer reading is the cautious one. Treat the letter as a conditional ceiling, not a guarantee.
The Mechanics, Step by Step
Here is how a file moves from request to a letter that holds up.
1. Pre-approval request. The lender reviews the deal, the borrowing entity and the investor’s experience. The letter typically follows that review, states a maximum loan or purchase amount, and does not obligate the lender to fund.
2. Documents requested. Expect a bank statement, entity papers, a schedule of real estate owned and ID, plus a credit check. Some lenders ask for more, some far less. The 620 minimum credit score on the network sits alongside additional conditions below 660. Underwriting stays asset-based: property, plan and exit.
3. Letter issued. The best letter is property-specific and names the buyer entity. The name should match the party on the offer. A mismatch between entity and offer is an easy way to lose credibility.
4. Seller’s agent verifies. The agent checks that the lender exists, the signature is real, and the amount and date make sense. Many listing agents also want a bank statement attached, especially for letters from private lenders.
5. Your liquid funds are tested. Only liquid money counts. Checking, savings, money market and CDs qualify. Retirement accounts, stocks and home equity usually do not count unless you document that you can reach the cash.
6. After contract. The letter goes in with the offer. Once the offer is accepted, the lender orders an appraisal. Underwriting then re-tests the cash side: the sourced down payment, the contract terms and the appraisal. This step decides whether the letter’s amount survives.
The Four Buckets Every Dollar Gets Sorted Into
Lenders think of your cash in four buckets. Each bucket needs its own proof, and one dollar cannot sit in two buckets.
- Down payment. The shortfall between project cost and the loan.
- Closing costs. These sit outside the loan and come from your own funds.
- Early rehab spend. Up to 100% of the rehab budget funds in draws against completed work, but you carry early repair costs until reimbursement. Rehab money is not cash you hold at closing.
- Reserves and working capital. Money left after closing to carry the project.
The no-double-counting rule matters most. If funds are earmarked for the down payment, they cannot also be shown as reserves. A statement balance is not the same as available funds. It is the pool you divide.
Reserves vary by lender, loan size and leverage. Treat any figure you see online as a market statistic, not a promise.
How Different Asset Types Are Treated
| Asset | Typical treatment | What helps |
|---|---|---|
| Checking, savings, money market, CDs | Counts | Seasoned statements |
| Brokerage and stocks | Usually not as-is | Documented liquidation |
| Retirement accounts | Usually not as-is | Documented access to the cash |
| Home equity | Usually not | Cash actually drawn and sourced |
| Partner or JV money | Not yours | Letter naming whose money it is |
| Gift, business, recently sold funds | Extra documentation | Paper trail for the source |
Elika Real Estate draws the same line: a pre-approval letter speaks to what a lender will provide, so it cannot stand in for proof of the buyer’s own money. Different documents, different proof.
Entity ownership adds one more layer. When an LLC is the borrower, the lender looks at whose accounts hold the money and whether the members and guarantors can actually access it. Entity treatment is subject to lender program eligibility, and a clean operating agreement plus matching account titles removes a common gap.
Where the Rule Breaks: Edge Cases
Cash offers using hard money. A legitimate lender that has underwritten the deal and confirmed your cash to close can state exactly that in a letter. Sellers often still prefer a real bank statement. Presenting a financed offer honestly is the safer course. An offer reads as credible when nothing in it overstates the buyer’s position.
Lines of credit. Some sources list an open line of credit as proof of funds. Bank-owned sellers can balk. A bank seller may want funds drawn into a checking account, and some asset managers will not accept a letter that does not apply to their file.
Partner or JV money. Someone else’s funds do not count as yours. The letter should identify whose money it is. A letter from a partner’s financial institution does not oblige that partner to invest.
Gift, business and recently sold funds. These usually need extra paper. Sourcing a recent deposit is routine, but a deposit with no trail is a flag.
Rehab holdbacks. Renovation funds are held in escrow and released in draws as work is completed and inspected. You need your own cash for the early repairs. Investors who count the full rehab budget as available cash get surprised at the first draw.
Two meanings of “POF.” Investors use the term both for a bank letter showing cash and for a lender letter verifying a financing pre-approval. Say which one you are sending.
What Happens Between the Letter and Closing?
The letter is a snapshot. The file is a moving picture. Between the letter and the settlement, the lender re-tests what the letter assumed.
- If the appraisal comes in light, the loan amount can change, which changes your cash portion.
- If the executed contract differs from what the letter assumed, the number gets rebuilt.
- If balances move, large deposits land or funds get spent under contract, the lender asks for an explanation and a fresh statement.
The practical habit: stop moving money once you are under contract. Keep the accounts that back the file in place until settlement reconciliation is done.
How Sellers and Agents Read the Letter
Sellers read a letter to answer one question: will this buyer close? Clever explains that a mortgage pre-approval tells the seller a lender will probably fund most of the purchase, but the lender is protecting its own money and is not vouching for the cash the buyer brings. That gap is why agents ask for a statement alongside the letter.
Word the offer to match the facts. If you are using financing, say so. A fake or generic letter makes you and your agent look bad, and it is not worth the risk. For more on what these letters contain, see Lendmire’s piece Can a Hard Money Lender Provide a Proof of Funds Letter for Offers?.
Mistakes That Shrink or Void Your Number
- Treating the letter as cash.
- Counting retirement or brokerage balances without documenting access.
- Showing the same dollars as both down payment and reserves.
- Ignoring closing costs and early rehab spend.
- Using an entity name that does not match the offer.
- Moving money between accounts after the statement date without a paper trail.
- Assuming hard money means no documents. Lenders still look at credit, entity papers and bank statements.
Pre-Submission Checklist
- Consolidate the accounts that will back the deal and keep them in place.
- Pull current statements for each account, with all pages.
- Prepare a short explanation and source for any large recent deposit.
- Confirm the entity name matches the offer.
- Split your cash into the four buckets on paper before you apply.
- Have partner or JV letters ready if other people’s money is involved.
Planning the Exit: Where Bank Statements Show Up Again
Many investors use hard money to acquire and then refinance into long-term rental financing once the property is stabilized. Lendmire brokers that path. At that stage the document is the same, a bank statement, but it proves something different. On a DSCR file, statements verify funds and reserves, not personal income, and the loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. A clean, seasoned cash trail from the first deal helps at both stages. Lendmire’s complete DSCR loans guide walks through the longer-term side.
Clearing the coverage test is not the same as positive cash flow. The calculation compares rent to the monthly housing payment only. Repairs, vacancy, management and utilities sit outside it. Tax treatment varies; consult a qualified professional.
Key Terms Defined
Proof of funds (POF): a document showing money you already control.
Pre-approval letter: a lender’s conditional statement of the maximum it is prepared to lend.
Commitment letter: the document that actually obligates a lender to fund, subject to its conditions.
Loan-to-cost (LTC): the loan amount as a share of total project cost, used to size hard money loans.
After-repair value (ARV): the projected value of the property once the work is finished.
Liquid funds: cash and near-cash you can reach now, such as checking, savings, money market and CDs.
Draws: rehab money released in stages as work is completed and inspected.
Frequently Asked Questions
Does a hard money pre-approval letter count as proof of funds?
No. The letter states what a lender is prepared to lend. Proof of funds shows your own money. Many agents want a bank statement attached to a lender’s letter, so plan to send both.
Do retirement accounts or stocks count toward my funds?
Usually not as they stand. Liquid money counts. Retirement and brokerage balances generally need documentation that you can reach the cash, which in practice often means liquidating and showing the cash in an account.
Can the same money cover my down payment and my reserves?
No. Each dollar has one job. If funds are earmarked for the down payment, they cannot also count as reserves or closing costs. Split the balance into buckets before you apply.
Does the letter guarantee the loan will fund?
No. It is conditional. The appraisal, the executed contract, sourced funds and the lender’s own conditions can change the amount or end the deal. Only a commitment letter obligates the lender, and even that carries conditions.
Whose accounts count if my LLC is the borrower?
It depends on the lender and the file. The lender looks at who holds the money and whether the guarantors can reach it. Partner funds do not count as yours unless the letter identifies whose money it is. Entity treatment is subject to lender program eligibility.
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. Reach the team at 828-256-2183 or request a quote.
For current guidelines and terms, see Lendmire’s hard money loan programs page.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s traditional personal-income documentation, is central to lender review on DSCR files, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Bankrate – Proof of funds letter
2. Elika Real Estate – Proof of Funds Letter
3. Clever – POF vs pre-approval
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Hard Money Lender Counts Seasoning on a Flip · How a Hard Money Lender Counts a Seller-Financed Down Payment · How a Hard Money Lender Sizes a Flip Without Income Documents
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.