Complete Guide For A Hard Money Loan On Single-family Properties — The Quick Read: A hard money loan is a short-term, business-purpose loan. It’s secured by the property itself, not by the borrower’s income or credit. Underwriters look at the purchase price, the rehab plan, and the after-repair value first. They check the borrower’s file second. Terms typically run 6 to 18 months. They’re interest-only, with no prepayment penalty. Private capital funds the loan, not a bank. Most investors exit by selling the property or by refinancing into a longer-term rental loan once it’s stabilized.
Key takeaways:
What this loan actually costs to carry in your market.
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.
- Underwriting is asset-first — the property and the plan carry more weight than a W-2 or tax return.
- Leverage is measured against project cost, not a flat loan-to-value number, and it scales up with a documented track record.
- Every structure on this product is short-term and interest-only. There’s no 15-year or 30-year hard money loan.
- Owner-occupied homes, land, and commercial buildings sit outside this product entirely.
- The trade itself has quietly moved away from the phrase “hard money” in favor of “private lending” or “bridge lending” — same product, different label.
What “Hard Money” Actually Means Here
The term describes a loan where the “hard asset” — the real property — secures the deal. It’s not about how hard it is to qualify. That’s a common misread. Lenders base approval on property value and deal economics, not on a personal credit profile. Underwriting also moves faster than on a conventional mortgage, since there’s less personal financial paperwork to chase down.
Worth knowing before diving further: the industry’s own trade groups have started retiring the phrase. In an interview on the topic, Scotsman Guide reported that a national trade association passed a resolution encouraging members to drop “hard money” for terms like “private lending” or “bridge lending.” Part of the reason is that the old label carries a “loan to own” stigma, and that stigma doesn’t match how the space actually operates today. Scotsman Guide itself renamed its own lender listings from “hard money” to “private money” around the same period. If a lender’s marketing calls this “bridge financing” or “transitional lending,” it’s the same underwriting logic under a cleaner name.
How Underwriting Actually Treats the File, Step by Step
A private lender doesn’t ask “can this borrower repay from their paycheck?” first. The lender asks: “if this loan goes sideways, can the property sell to recover the principal?” Everything else builds around that one question.
1. Deal submission. The borrower brings the purchase price, the rehab budget (if any), and a projected after-repair value. This is the core of the file, not a supporting document.
2. Track record review. Lenders in the network ask how many similar projects the borrower has finished. More completed deals unlock more leverage — this shows up directly in the loan-to-cost tiers below.
3. Credit check. A minimum score generally around 620 applies across the network, with additional conditions layered in below roughly 660. First-time investors can still qualify, typically at the lower end of the leverage range.
4. Appraisal and valuation. Even outside agency lending, appraisers commonly use the same standardized forms found in conventional underwriting. Fannie Mae’s own appraiser resources list Form 1007, the Single-Family Comparable Rent Schedule, and Form 1025, the Small Residential Income Property Appraisal Report — both used to document rental income potential on 1-4 unit properties.
5. Closing and draw setup. For rehab-heavy deals, funds split into two parts: an acquisition tranche released at closing, and a rehab tranche held back and released in draws.
6. Draw disbursement. Rehab funds get released against completed, inspected work — not handed over in a lump sum up front.
7. Exit. The loan gets repaid through a sale or a refinance before the term expires. There’s no built-in extension into a long-term amortizing structure.
A widely cited practitioner framework breaks the underlying logic into three checks: collateral, capacity, and credit, with collateral carrying the most weight because it’s the single item securing the loan. That framework tracks closely with how deals actually get structured across the network Lendmire places files through.
The Structures and Leverage Tiers
Leverage on a hard money file isn’t one flat number. It’s loan-to-cost, and it moves with the borrower’s experience and the type of deal.
- Fix-and-flip: leverage typically runs up to 93% of project cost for borrowers with five or more completed projects, 90% at two or more, and 85% for investors with fewer than two — every tier capped at 75% of after-repair value. There’s no true 100% purchase program on this product; leverage is measured against total project cost, and the ARV cap sets the ceiling no matter the experience tier.
- Bridge purchases without rehab: up to 80% of purchase price for a straightforward acquisition with no renovation component.
- Cash-out and rate/term refinance: up to 65% of value, generally the tightest leverage on the sheet.
- Ground-up construction: up to 90% of cost, or 75% of completed value, for borrowers with three or more completed builds.
- Rehab funding: up to 100% of the rehab budget itself can fund through draws — a separate figure from purchase leverage, tied only to verified, completed work.
Loan amounts on most files run up to $5,000,000, with exceptions above that for the right deal; smaller balances vary by lender in the network. Terms sit at 6 to 18 months, interest-only, with no prepayment penalty — there are no multi-year structures on this product. An investor who needs more time than that isn’t a fit for hard money. That investor needs a permanent rental loan instead — a different product with a different underwriting model, covered in Lendmire’s complete DSCR loans guide.
Key Terms Defined
Loan-to-cost (LTC): the loan amount shown as a percentage of total project cost — purchase price plus rehab budget — rather than as a percentage of the property’s current or future value.
After-repair value (ARV): the projected market value of the property once renovation work is complete, used to cap leverage even when loan-to-cost math would allow more.
Draw schedule: the process of releasing rehab funds in stages, tied to inspections that confirm specific phases of work are finished.
Business-purpose loan: a loan made to acquire or improve a property held for investment or income, not as the borrower’s residence — the classification that determines which consumer-protection rules apply.
Balloon payment: the full remaining loan balance due at the end of the term, paid off through a sale or a refinance rather than through gradual amortization.
Where the General Rule Breaks
The clean “asset-based, light-document” story only holds for non-owner-occupied 1-4 unit property. Several situations flip that logic.
Owner-occupancy changes the rulebook entirely. Business-purpose loans on non-owner-occupied property fall outside most federal consumer-lending disclosure requirements. The CFPB’s own compliance guidance confirms that credit extended to acquire or improve non-owner-occupied rental property is treated as business-purpose credit. The moment that same structure touches an owner-occupied 1-4 unit home, that exemption can disappear — which is exactly why this product doesn’t touch owner-occupied property at all.
Misclassifying the loan is a real risk, not a technicality. A common assumption holds that any loan labeled “investment” or “business purpose” is automatically exempt from consumer protection law. Legal practitioners warn that’s not guaranteed — a legal client alert on business-purpose lending notes that lenders can face real penalties for incorrectly categorizing a loan as exempt. That’s a reason underwriting on this product stays disciplined about occupancy and entity type rather than assumed.
Short-term rentals don’t fit the standard appraisal tool. Form 1007 documents monthly, long-term rent — it isn’t built for nightly STR income. Appraisal-industry publisher McKissock points out this mismatch directly, which matters for investors planning to acquire a short-term rental with hard money and refinance later based on projected nightly income. Short-term rental rules can also vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income at all.
Ineligible property types stay firmly outside this product. Commercial buildings, industrial property, raw land or lots, hospitality assets, and any owner-occupied home are not offered on this program — not harder to finance, simply not on the sheet. Eligible collateral is non-owner-occupied residential property, 1-4 units, with ground-up construction extending to as many as 10 units.
Coverage isn’t nationwide. Lendmire arranges hard money financing through select lenders reaching 40 markets, including Washington, D.C. — but the product isn’t currently available in Louisiana, Minnesota, North Dakota, or South Dakota, and coverage carves out Baltimore, Chicago, and Detroit specifically. Any of these figures vary by lender, property, and borrower experience, and nothing here is a commitment to lend.
Hard Money vs. a Standard Mortgage
| Factor | Hard Money Loan | Standard Mortgage |
|---|---|---|
| Approval basis | Property value, deal economics, experience | Personal income, credit, DTI |
| Term length | 6–18 months, interest-only | 15–30 year amortizing |
| Occupancy | Non-owner-occupied investment property only | Can be owner-occupied or investment |
| Repayment | Balloon payoff at sale or refinance | Monthly principal and interest over the term |
What the Decision Looks Like in Practice
Hard money loans are business-purpose loans on non-owner-occupied property. Because of that, they get reviewed under a different set of rules than a consumer mortgage — a distinction that shapes everything from documentation to disclosure timing.
An investor’s biggest decision isn’t just whether they qualify — it’s what happens at the end of the term. A flip with a clean sale timeline is straightforward: the loan pays off from proceeds. A buy-and-hold single-family deal is different. Once the property is renovated, leased, and stabilized, many investors refinance the hard money balance into a long-term rental loan — typically a DSCR loan qualifying primarily on the property’s rental income covering the payment, subject to lender guidelines, rather than personal income documentation. Cash-out refinances on that side of the business generally cap around 75% loan-to-value across most of the network, with roughly six months of seasoning expected before a lender will consider the refinance.
That handoff is exactly what BRRRR investors are managing, and it’s worth reading Lendmire’s guide on refinancing a hard money loan after a BRRRR strategy before locking in a purchase timeline. For the rental-hold side of that equation, Lendmire’s guides on the DSCR loan for single-family properties, the interest-only DSCR structure, and the no-ratio DSCR path cover what happens after the exit.
If a hard money file is on the table right now, reaching Lendmire at 828-256-2183 or requesting a quote gets a real conversation about leverage tier, experience, and exit plan — not a generic pricing quote.
Frequently Asked Questions
Can I get a hard money loan with bad credit?
A lower score doesn’t automatically disqualify a borrower, but it does limit leverage. A minimum around 620 typically applies across the network, with additional conditions layered in below roughly 660, and first-time investors land at the lower leverage tiers rather than the top ones.
Is an appraisal required?
Yes, on nearly every file. Lenders still need a documented value opinion to size the loan, and appraisers commonly reference standardized rent-schedule forms like Fannie Mae’s Form 1007 to support projected rental income on the property.
Can a hard money loan be used for a primary residence?
No. This product is structured exclusively for non-owner-occupied investment property. The moment a residence is owner-occupied, it falls under a different regulatory framework and a different loan product entirely.
What happens if I can’t sell or refinance before the term ends?
The loan comes due at the end of its term, generally 6 to 18 months, with no built-in extension into a longer amortizing structure. This is exactly why lenders in the network ask about the exit plan up front — a credible sale or refinance path is part of qualifying, not an afterthought.
Do all states treat hard money loans the same way?
No — licensing and disclosure obligations vary by property location, not by where the lender operates, and they can shift based on whether the borrower is an individual or an entity. Investors working across multiple states should expect the rules to differ from one property’s location to the next.
Short-term financing tends to work best when the long-term plan is decided early – see refinancing out of a hard money loan with a DSCR loan.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 39 states plus Washington, D.C. — 40 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.
Many investors treat hard money as the acquisition tool and plan the exit up front – see refinancing out of a hard money loan with a DSCR loan.
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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. Scotsman Guide — Jeff Tennyson / National Private Lenders Association interview
2. Fannie Mae — Appraisers and Property Underwriting
3. Hard Money Defined and the Loan Process
4. Consumer Financial Protection Bureau — Truth in Lending Act summary
5. Hunton Andrews Kurth — Beware: Business Purpose Loans and Regulatory Implications
6. McKissock — Form 1007 and Its Impact on Short-Term Rental Appraisals
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.
