The Quick Read: Usually, yes: most hard money lenders will issue a preapproval, conditional approval, or non-binding term sheet before you have a contract, but the letter is a conditional statement of intent, not a promise to lend, and the lender still appraises the property and reviews your exit plan once your offer is accepted.
- The document goes by several names, and they are not interchangeable.
- Some lenders pre-approve you as a borrower. Others only review a specific deal.
- Tell your title company early that a hard money lender is funding the purchase.
- Pre-checking your long-term refinance before you offer protects you at the back end.
What Does a Hard Money Preapproval Look Like?
It is a letter or term sheet that names the lender, the borrower or entity, an approved amount, and the key conditions. The wording differs from lender to lender, and so does what stands behind it. Think of it as a signal to the seller that real financing exists.
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.
Hard money lenders do not hold your deposit accounts. They can’t see your balances the way a bank can. So the paperwork they issue usually leans on documents you supply.
Here is how the common documents differ.
| Document | What it says | Tied to one property? |
|---|---|---|
| Preapproval | Lender reviewed you; amount stated | Often no |
| Proof-of-funds letter | Funds or credit line exist | Usually no |
| Conditional approval | Approved if conditions are met | Sometimes |
| Term sheet / commitment | Draft terms for a specific deal | Yes |
| Final approval | Appraisal, title, and file cleared | Yes |
Two of those get confused constantly. A preapproval letter does not prove you hold the funds. A proof-of-funds letter does not show a lender has reviewed you for a loan. A seller’s agent may want one, the other, or both.
Many lenders issue only a general letter, because writing a new one for every address you chase is a lot of work. A property-specific letter tends to carry more weight with sellers. Ask which kind your lender offers before you build a strategy around it.
Does Timing Matter Before You Make Offers?
Yes. The best time to ask is before you need it, because a seller will not wait while you shop lenders. Many hard money lenders are deal-by-deal, so some will not issue anything until you have an address and a price. Others approve you up to a stated amount after an application and a few documents. Learn which kind you are dealing with early.
Run a scenario. You spot a small multifamily that looks underpriced, and the seller’s agent has two other interested buyers. If you call a lender cold, you spend your first day collecting documents. If you pre-vetted a lender last month, you send a letter with your offer and the lender only has to look at the deal.
One more point on timing. The letter protects your earnest money. If you offer with no cash and no lender commitment behind you, a failed financing step can cost you that deposit.
Cash versus financed offers is where practice splits. Some contracts treat a hard money purchase like cash, with no financing contingency. Others write it as a financed offer with a contingency. The right choice depends on your contract and your state, so ask a real estate attorney or your agent before you submit.
How to Get Preapproval for a Hard Money Loan, Step by Step
Pick the lender first, send a preliminary package, let the lender review you and the deal, then ask for a letter that matches your offer. Here is the typical order:
1. Choose the lender before offers. Build the relationship now. The groundwork is done before you need the money.
2. Send a preliminary package. Expect account statements or proof of a credit line, entity documents, and partner information if you buy through a company.
3. Let the lender run you. Credit and background checks usually come early. Lenders also weigh your experience and your liquidity.
4. Describe the deal if you have one. Purchase price, rehab scope, and the after-repair value all matter.
5. Get the letter or term sheet. Check the amount, the named borrower, and the expiration date. Validity varies by lender.
6. Appraisal after acceptance. Once the seller accepts, the lender orders the appraisal and underwrites the collateral. From there the file looks much like any other loan.
7. Tell title. Title has to prepare the mortgage, the note, and related documents. Do not spring this on them days before closing.
A simple checklist helps. Gather your entity documents, recent account statements, a list of completed projects with addresses, and a short exit plan. Be honest about what is missing.
What Do Hard Money Lenders Check?
The property and the plan matter most. Hard money is asset-based, which means the lender’s main concern is whether the real estate supports the loan. Your credit and experience still count, but they do not carry the file alone.
The deal. Lenders look at the purchase price, the as-is value, the rehab scope, the after-repair value (ARV), and the title. A rehab with a thin margin gets hard questions.
The borrower. On the hard money programs Lendmire arranges, the minimum credit score is typically 620, with additional conditions below 660. Experience sets your leverage tier. On fix-and-flip files, leverage typically runs up to 93% of project cost at five or more completed projects, up to 90% at two or more, and up to 85% with fewer than two. Every tier is capped at 75% of ARV. Bridge purchases with no rehab typically reach up to 80% of purchase price. Cash-out and rate-and-term refinances typically reach up to 65% of value.
Those are loan-to-cost figures, not a standard LTV. They also vary by lender, property, and experience, and nothing here is a commitment to lend. There is no true 100% purchase program. Rehab money can fund up to 100% of the rehab budget in draws against completed work, but that is a budget figure, not a purchase loan.
Loan sizes typically run up to $5,000,000, with larger loans by exception. Terms typically run 6 to 18 months, interest-only, with no prepayment penalty. Collateral is non-owner-occupied residential, one to four units, and ground-up construction can go to ten units.
Your first-time investor path. Lack of experience is not a dead end. First-time investors can qualify at the lower leverage tiers. Extra liquidity and real equity in the deal help offset a thin track record.
Entity or personal name. Many investors buy through an LLC. Lender acceptance of entity borrowers depends on program guidelines, so settle the borrowing structure before you build your offer around it.
The Exit Plan Is Part of the Preapproval
A lender who funds a short-term loan wants to know how it gets paid off. You will sell or refinance. That is the exit.
Some lenders ask whether you can refinance into long-term financing before they commit. This is where a rental takeout comes in. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. Your bridge preapproval means little if the takeout fails.
DSCR is the debt service coverage ratio. It compares monthly rent to the full monthly housing payment, which is principal, interest, taxes, insurance, and any association dues. On purchases, most DSCR files in the network land at 75%–80% LTV. Cash-out refinances top out around 75% LTV for standard rentals, with about 6 months of seasoning common. A 1.00 coverage ratio is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
One caution. Clearing 1.00 does not mean positive cash flow. DSCR only compares rent to the payment. Repairs, vacancy, management, and utilities sit outside it. For a closer look at the takeout side, see Lendmire’s piece BRRRR Takeout Inputs to Stress-Test Before Hard Money Closes. The complete DSCR loans guide covers the long-term product in full.
How Do You Use the Letter With Agents and Sellers?
Send it with the offer, and make it easy to read. Sellers and listing agents often will not take an offer seriously without evidence of funds. A strong letter has a recognizable lender, a clear amount, your name or entity, and a current date.
Expect some skepticism. Some agents discount letters from lenders they do not know. A few will not process them at all. Calling the lender yourself and offering a verification contact can help.
Tell your own agent too. They can set your search budget and frame you as a serious buyer. A letter does not make you a cash buyer, and you should not write it as one.
Wholesalers should be careful. A seller gains little from a wholesaler’s funds letter, because the wholesaler may not intend to close. A letter helps most when the buyer plans to close and hold.
What a Preapproval Does Not Promise
It does not promise a loan. A preapproval does not obligate a lender. A loan commitment does. Even then, conditions remain.
Things that can change the outcome:
- An appraisal below your assumptions.
- A rehab scope that grew after the walkthrough.
- A title problem.
- A change in your liquidity or credit.
- A property type outside the lender’s box.
- An expired letter.
Property type is a real filter. The hard money programs Lendmire arranges cover non-owner-occupied one-to-four-unit residential. Commercial, industrial, land, hospitality, and owner-occupied properties are not on the sheet. Confirm your target fits before you write the offer.
Mistakes and Red Flags
- Offering before confirming fit. Check property type, location, and rehab scope first.
- Hiding the lender from title. Late surprises can derail a closing.
- Treating the letter as a loan. Write your offer terms to match what you actually hold.
- Skipping the exit math. A flip that doesn’t sell or a rental that doesn’t refinance leaves you carrying a short-term loan.
- A preapproval that is only a marketing label. If a lender won’t tell you what was reviewed, the letter may be worth little.
- Applying everywhere. Pick one or two lenders and be consistent about the story.
If you are declined, ask what failed. Sometimes the fix is a lower leverage tier, a smaller loan, a different property, or a stronger exit plan.
Hard Money Preapproval vs. Conventional Preapproval
| Factor | Hard money | Conventional |
|---|---|---|
| Main focus | Property value and plan | Borrower income and credit |
| Typical letter | Term sheet or POF letter | Preapproval letter |
| Verification | Varies widely by lender | Documented income and assets |
| Binding? | Rarely | Conditional |
Hard money loans are business-purpose loans on non-owner-occupied investment property. Because of that, they sit outside many consumer mortgage rules, such as the exemption for business-purpose credit described by the CFPB’s Truth in Lending summary. Practically, don’t expect consumer-style preapproval conventions to apply.
Key Terms Defined
Preapproval: a lender’s written statement that it reviewed you and would lend up to a stated amount, if conditions are met. It is not a loan commitment.
Proof-of-funds letter: a document showing that money or a credit line exists. It does not show loan approval.
Term sheet: a draft of the loan terms a lender would offer on a specific deal.
After-repair value (ARV): the estimated value of the property once the rehab is finished.
Loan-to-cost: the loan amount as a percentage of what the project costs, including purchase and rehab.
Exit strategy: how you plan to repay the loan, usually by selling or refinancing.
Frequently Asked Questions
Is hard money preapproval required before I make an offer?
No. Some seasoned investors with established lender relationships skip it. But sellers often ask for evidence of funds, and a letter protects you from an offer that goes nowhere. If you are new or buying in a crowded market, get one.
Does preapproval hurt my credit?
It depends on the lender. Many run a credit check and a background check up front. Ask before you apply whether they pull credit at the preapproval stage or only after you have a deal.
How long does a letter last?
It varies by lender, and there is no standard validity period. Ask for the expiration date in writing. If you keep offering after it passes, request a refreshed letter.
Can one approval cover several properties?
Sometimes. A general letter or an approved borrowing amount can apply across deals. A property-specific term sheet only covers one address. Confirm which you have before you submit multiple offers.
What if I do not have a property yet?
Many lenders will review you as a borrower and issue a general letter. Others won’t engage until you have a property with a known price. Be ready to name the address once you pick one, because the letter then becomes deal-specific.
Next Steps
Before your next offer, choose a lender, assemble your documents, and sketch your exit. Check the takeout too, using Lendmire’s guide How to Stress-Test DSCR Before Refinancing a BRRRR Out of Hard Money.
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. As a broker, it arranges loans through select lenders across 41 markets, including Washington, D.C. Call 828-256-2183.
A seller reads your letter in seconds, so the strongest offers pair it with a believable plan for paying the loan back.
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.
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References
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 an LLC Qualify for a Hard Money Loan as the Borrower? · Can You Exit a Hard Money Loan by Refinancing Into a DSCR Loan? · Can You Get a Hard Money Loan With No Down Payment?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.