The Quick Read: A hard money lender counts a self-employed borrower’s down payment by confirming that the cash sits in an account the borrower owns or controls, that deposits can be traced, and that the money is not borrowed, then measuring that equity against the project’s cost and the leverage tier the borrower’s experience supports. Tax-return income matters far less than it does on a bank mortgage, because the loan is asset-based.
- Whose name is on the account matters more than whether the account is personal or business.
- Large, recent, unexplained deposits trigger a sourcing question, even when no fixed holding period applies.
- Borrowed money, including card advances, is the funding source lenders push back on hardest.
- Leverage is tied to project cost and completed projects, so thin borrower equity means a smaller loan.
- Rules differ by lender, property, and experience, and nothing here is a commitment to lend.
What Is the Lender Actually Verifying?
A hard money lender verifies the deal first and the borrower second. The collateral, the plan, and the exit carry the file. The down payment check is a narrower question: does the borrower have real money of their own at risk?
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.
Self-employed borrowers often worry about the wrong thing. Their traditional personal-income documentation may show modest income after deductions, and on a conventional file that hurts. Hard money underwriting stays asset-based, so the lender looks at the property, the budget, and the exit rather than at personal income. What the lender wants from you is a statement showing cash to close, and often some liquidity left over afterward.
Across the lenders Lendmire works with, the pattern is consistent. Nobody asks a self-employed borrower to prove a salary. Everybody asks where the cash came from.
Key Terms Defined
Down payment: The share of project cost the borrower funds with their own money rather than the lender’s.
Proof of funds: A recent account statement showing the borrower’s own money, not a lender letter or pre-approval.
Seasoning: The length of time money has sat in an account before it is counted.
Sourcing: The paper trail that explains where a specific deposit came from.
Loan-to-cost: The loan amount as a share of total project cost, including purchase and rehab.
Reserves: Liquid cash left after closing, commonly requested as a cushion beyond the down payment.
How the Lender Counts the Money, Step by Step
1. The lender sets a proof-of-funds standard. At minimum, expect a recent statement covering the down payment, closing costs, and often some reserves. Each lender writes its own policy.
2. The account must belong to the borrower or the borrower’s entity. Ownership and access matter more than the account label. For a self-employed investor, the cash often sits in a business account, which can work when the borrower clearly owns or controls it.
3. Large or recent deposits get a question. Some lenders ask for no seasoning at all. Many still want large new deposits explained for anti-money-laundering reasons and to rule out a straw buyer.
4. The lender tests whether the funds are borrowed. A card advance or an undisclosed loan means the down payment is not truly the borrower’s equity. Lenders treat that very differently from savings or sale proceeds.
5. The lender applies the leverage tier. Equity the lender will not count shrinks the loan or delays the deal. The tier depends on completed projects, not on how much cash the borrower holds.
That last step is where most files get decided. Typical leverage across the network, varying by lender, property, and experience:
- Fix-and-flip: 85% of project cost with fewer than 2 completed projects, 90% of project cost at 2 or more, and 93% of project cost at 5 or more. Every tier is capped at 75% of after-repair value.
- Bridge purchase without rehab: up to 80% of purchase price.
- Refinance, cash-out or rate-and-term: up to 65% of value.
- Rehab budget: up to 100% of the budget funds in draws against completed work. That is a draw structure, not purchase leverage.
There is no true 100% purchase program. The top tier is reserved for experienced investors, and credit generally needs a 620 minimum, with extra conditions below 660.
Which Funds Count, and How Much?
Treatment varies by lender, but the logic repeats. The more directly the money is yours, and the more cleanly it is documented, the more readily it counts.
| Fund type | Typical treatment | What to document |
|---|---|---|
| Personal checking or savings | Counts | Recent statements, all pages |
| Sole-owned business account | Usually counts | Entity papers, ownership proof |
| Partnership business account | Often limited to your share | Operating agreement, signing authority |
| Sale proceeds | Counts with proof | Settlement statement |
| Gift funds | Varies widely by lender | Gift letter, donor transfer record |
| Card advances or loans | Frequently refused | Disclose early; expect questions |
Worked Examples With Round Numbers
These use percentages only, as modeled assumptions rather than market facts.
Sole owner, one business account. A borrower owns 100% of an LLC and holds sole signing authority. The business account carries the whole down payment on a bridge purchase at 80% of purchase price. Most lenders accept this with entity documents and a statement, since ownership and access are clear.
Minority partner. A borrower owns 40% of a business, and the partners share signing authority on a joint account. Some lenders count the full balance if the borrower can access it. Others credit only the 40% share. The same cash can support a very different loan depending on the lender.
Mixed accounts. A borrower moves cash from the business account to a personal account two days before the file goes in. The balance now looks like a large new deposit. The money was legitimate, but the borrower needs a transfer record and a short written explanation. A clean paper trail made earlier would have avoided the question.
The practical lesson: decide which account will fund the closing before you submit, and leave the money there.
Where the General Rule Breaks
Gift funds. Some hard money lenders do not care much whether a down payment is a gift, while others want a letter and a transfer record. Conventional lenders verify it more strictly. Because the answer varies, ask at the start of the deal.
Purchase versus refinance. On a purchase, the down payment is fresh equity, so sourcing gets attention. On a refinance, the lender looks at existing equity in the property. For contrast, Fannie Mae’s guide asks for large-deposit documentation on purchases that rely on the deposit, and that requirement does not apply the same way to refinances, per its depository accounts rules. Hard money lenders are not bound by that guide, but the underlying logic is common.
Why no single rule governs this. Hard money loans are business-purpose credit, and federal consumer-mortgage rules generally exempt that category under Regulation Z’s business-purpose exemption. Each lender therefore sets its own funds policy, which is why the tests above differ from lender to lender.
Ownership share. Partners and minority owners hit the most inconsistency, as the second example showed. If your share is under 100%, get the lender’s treatment in writing before you commit to a contract.
What Stays in the Business?
Lenders generally care about two checks: cash to close and what remains afterward. A borrower who drains the operating account to hit the down payment may satisfy the first and fail the second. Some lenders ask for liquidity after closing, and others focus on the project.
Self-employed borrowers should also think past the file. Payroll, tax payments, and vendor bills still come due. A deal that empties the business to fund equity is a risk to the borrower, whatever the lender accepts. Leave a working cushion in the entity, and keep the down payment in a separate, clearly owned account where possible.
Lenders review the return itself lightly here. Tax treatment varies; consult a qualified professional.
Document Checklist
- Recent bank or brokerage statements, every page
- Entity documents proving ownership of any business account
- A short written explanation, with backup, for each large deposit
- A transfer record if funds moved between accounts
- A gift letter, if any part of the money is a gift
- A project budget and exit plan, since the deal still drives the file
Lender policy varies, so confirm the list before you collect it. Most broker-side delays come from missing pages and unexplained deposits.
How Hard Money Compares With DSCR Financing
Hard money is a short bridge. DSCR Investor Loans is the long-term rental loan many investors move into afterward. The down payment test changes with the product.
| Factor | Hard money | DSCR loan |
|---|---|---|
| Purpose | Buy, rehab, bridge | Hold a stabilized rental |
| Term | 6-18 months, interest-only | 30-year fixed is the spine |
| Purchase leverage | Up to 80% of price (bridge) | Typically 75%-80% LTV |
| Credit | 620 minimum | 620 floor exists; most want ~660 |
| What decides the file | Property, plan, exit | Rent versus PITIA, plus equity |
DSCR financing qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. A larger down payment can lift that coverage by shrinking the payment, but it never erases leverage caps, credit floors, or reserve rules. Reserves commonly run around six months of PITIA, vary by lender and loan size, and can be waived on conservative rate-and-term files at modest leverage. Clearing 1.00 coverage also does not mean positive cash flow, since repairs, vacancy, and capex sit outside the calculation.
Many investors refinance out of hard money into long-term DSCR financing once the property stabilizes, and Lendmire brokers that path. Documentation habits built at the bridge stage carry over, so a clean paper trail now helps later. Lendmire’s complete DSCR loans guide covers the long-term side in full. For self-employed borrowers asking about the bridge itself, Lendmire’s article Can a Self-Employed Borrower Qualify for a Hard Money Bridge Loan? is the natural next read.
Frequently Asked Questions
Do hard money lenders require a down payment from a self-employed borrower?
Yes, in nearly every case, expressed through the leverage tier rather than a flat number. Fix-and-flip loans range from 85% to 93% of project cost depending on completed projects, so the borrower funds the remainder. Terms vary by lender, property, and experience.
Can I use money from my business account?
Often, when you own the account or hold clear access to the funds. Sole owners usually have the easiest path. Partners may find the lender counts only their ownership share, so ask first.
Is there a required seasoning period?
It varies. Some lenders ask for none, while others want large recent deposits explained. Even without a holding period, expect a question about any big new deposit, and keep the paper trail ready.
Can I borrow the down payment?
Usually not, and card advances are a common problem. Lenders want the borrower’s own equity at risk. If any part of the money is borrowed, disclose it early rather than hoping it passes unnoticed.
Is a proof-of-funds letter enough?
No. A lender letter is a pre-approval signal, while true proof of funds is a balance in the borrower’s own account. Expect to supply a statement.
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 broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C., and nothing here is a commitment to lend. For self-employed borrowers, the file that moves cleanly is the one where the money’s owner, source, and location were settled before the contract was signed.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. 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
1. Fannie Mae Selling Guide B3-4.2-02, Depository Accounts
2. CFPB Regulation Z § 1026.3, Exemptions
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Refinance Out of Hard Money After an Overspent Rehab? · How a First-Time Flipper Can Qualify for a Lower Hard Money Down Payment · Does Every Hard Money Lender Ask the Same Minimum Down on a Flip?
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
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.