The Quick Read: A hard money acquisition loan is a short-term, interest-only loan that funds the purchase of a non-owner-occupied investment property, and approval rests mainly on the property, the plan, and the exit rather than on personal income. This guide covers buying real estate, not buying an operating business. Lenders in the network size the loan on project cost and after-repair value, then look at credit, experience, cash, and entity paperwork. Terms and leverage vary by lender, property, and experience, and nothing here is a commitment to lend.
- Leverage is tiered by documented completed projects: up to 93% of project cost at 5+ projects, 90% at 2+, and 85% with fewer than 2, always capped at 75% of after-repair value.
- Bridge purchases with no rehab run up to 80% of purchase price.
- Credit minimum is typically 620, with added conditions below 660.
- Terms run 6-18 months, interest-only, with no prepayment penalty.
- Eligible collateral is non-owner-occupied residential, 1-4 units.
How Do Lenders Underwrite a Hard Money Purchase?
Underwriting starts with the deal, then moves to the borrower. The lender asks three things: what the property is worth, what the investor plans to do with it, and how the loan gets repaid. Personal income and debt-to-income ratios are not the center of the file.
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.
Across the wholesale network, the sequence looks the same on most files:
1. Deal analysis. The investor lays out purchase price, rehab scope, after-repair value (ARV), and the exit.
2. Loan request. The borrower submits the address, contract, budget, and plan.
3. Valuation. Depending on the lender, that can be a full appraisal, a broker price opinion, or a desktop valuation.
4. Sizing. The loan is capped by the lower of two tests: a percentage of project cost, and a percentage of ARV.
5. Borrower review. Credit, experience, entity documents, and proof of funds.
6. Closing and draws. Purchase money funds at closing. Rehab money is released in draws as work is completed.
7. Exit. The investor sells or refinances.
Why the property carries the file: these are business-purpose loans on investment real estate. The CFPB’s Truth in Lending summary treats credit to acquire or improve non-owner-occupied rental property as business-purpose credit, which sits outside the consumer ability-to-repay framework. Hard money lenders therefore underwrite the asset and the plan, not a paycheck. Business-purpose does not mean unregulated, though. State licensing and other rules can still apply, and lenders handle that on their side.
What Property Qualifies?
The property must be non-owner-occupied residential, 1-4 units, for a standard acquisition. Ground-up construction extends to 10 units. That is the whole eligibility sheet.
Not offered through this program: commercial, industrial, land or lots, hospitality, and owner-occupied properties. If you plan to live in the property, this is the wrong product. Occupancy matters because the business-purpose treatment depends on the loan’s purpose and use, not on the label “investment property.” Compliance Alliance notes that owner-occupancy plans and unit counts change which rules apply.
Condition is a feature here, not a defect. Distressed or non-rent-ready properties are the reason hard money exists. A heavily damaged house usually can’t sit under a long-term rental loan until it’s stabilized, so the short-term loan covers the acquisition and repair phase.
How Is the Loan Amount Calculated?
The loan is the lower of a cost-based figure and an ARV-based figure. If the ARV cap cuts the loan, the investor funds the gap in cash.
Leverage across the network is tiered by documented completed projects:
| Experience | Loan-to-cost | ARV cap |
|---|---|---|
| 5+ completed projects | Up to 93% of project cost | 75% of ARV |
| 2+ completed projects | Up to 90% of project cost | 75% of ARV |
| Fewer than 2 | Up to 85% of project cost | 75% of ARV |
Other structures sit beside the fix-and-flip tiers:
- Bridge purchase, no rehab: up to 80% of purchase price.
- Rate/term or cash-out refinance: up to 65% of value.
- Ground-up construction: up to 90% of cost and 75% of completed value at 3+ completed projects.
- Rehab budget: up to 100% of the rehab budget funds in draws against completed work. That is a rehab-budget figure, not a purchase ceiling.
There is no true 100% purchase program. Investors who see “100% financing” pitched should read the structure closely: it usually means the rehab budget is funded in draws while the investor still brings cash toward the purchase. The top tier is reserved for experienced investors, and all of these figures vary by lender, property, and experience.
Run the logic on a hypothetical. Say a property’s purchase price plus rehab budget is the project cost, and the lender’s ARV estimate comes in lower than the investor hoped. The 75% ARV cap, not the 85-93% cost tier, becomes the binding limit. The investor’s cash to close rises by the difference. ARV overreach is a common reason an investor’s required cash jumps late in the process.
Loan amounts run up to $5,000,000, larger by exception, with smaller balances varying by lender.
What Does the Borrower Need?
Most files need five things: cash, credit, experience, an entity, and a plan. Collateral leads, but the borrower side is not ignored.
Cash and reserves
The cost tier you land in sets your down payment. At 85% of project cost, the investor funds the remaining 15% of cost. At 93%, the gap narrows. Beyond that, budget for closing costs and some liquidity after closing. Lenders look at proof of funds for both.
Credit
A 620 minimum score is typical, with additional conditions below 660. Hard money is asset-based, so a weak score rarely ends a deal alone, but it can change leverage and terms. No lender in the network promises approval at any score.
Experience
Experience sets leverage more than eligibility. First-time investors can qualify at the lower leverage tiers. An experienced investor with documented completed projects moves up the table. Lenders typically ask for an experience schedule: addresses, purchase and sale dates, and results. If you’re new, a stronger credit profile, more cash in, and a realistic scope of work help the file.
Entity
Many investors close in an LLC. Depending on program guidelines, that can be fine for business-purpose loans, and it keeps the deal off the investor’s personal debt-to-income picture. Lenders review the operating agreement, EIN, and good standing. Form the entity before you sign the purchase contract, not after, so the contract buyer matches the borrower.
Plan
A written scope of work, a budget, a timeline, and a named exit. The exit plan is the most scrutinized item after collateral.
Key Terms Defined
After-repair value (ARV): The estimated market value of the property after renovation is complete.
Loan-to-cost: The loan amount as a percentage of purchase price plus the rehab budget.
Draw: A release of rehab funds after the lender confirms a stage of work is done.
Interest-only: A payment structure where the borrower pays only interest during the term, then repays principal at payoff.
Balloon payoff: The full principal due at the end of a short term, usually through a sale or refinance.
DSCR: Debt service coverage ratio. It compares a property’s rent to its full monthly obligation (principal, interest, taxes, insurance, and any association dues).
What Can Sink or Reprice a Deal?
Most declines trace back to the property, not the person. Here are the repeat offenders:
| Issue | What happens | Fix |
|---|---|---|
| ARV comes in low | ARV cap shrinks the loan | Bring more cash or renegotiate price |
| Weak scope of work | Draw schedule stalls | Itemize costs by phase |
| Title problems | Closing delayed or blocked | Order title early |
| Thin liquidity | Lender questions follow-through | Show proof of funds |
| Ineligible property type | Not offered | Redirect to a different product |
Rehab-timeline risk is its own category. A six-to-eighteen-month term gives limited room, and a stalled project can run into the payoff date. With no prepayment penalty, an investor can exit early, but nothing in the structure makes a late exit cheaper.
Exit Strategy: The Part Lenders Read Most Closely
The exit is either a sale or a refinance into long-term debt. A credible plan names which one and shows the numbers behind it.
For a sale exit, that means resale comps that support your ARV. For a refinance, it means the stabilized property can carry the long-term loan. Many investors refinance out of hard money into long-term DSCR investor loans once the property is leased and stable, and Lendmire brokers that path. A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. A 1.00 ratio is the floor for select programs, and a separate select-lender path goes below 1.00 with leverage and terms adjusted. Stronger ratios open better leverage and pricing.
Keep one distinction clear: clearing 1.00 on DSCR is not the same as positive cash flow. DSCR compares rent to the full monthly obligation only. Repairs, vacancy, management, utilities, and capex sit outside the calculation.
The Lendmire complete DSCR loans guide covers the long-term side in more detail. Investors planning the handoff should work backward from it: the post-rehab appraisal and achievable rent have to support the payoff.
Hard Money vs. Other Ways to Buy
The right product depends on the property’s condition and your timeline.
| Factor | Hard money | Long-term DSCR loan |
|---|---|---|
| Underwritten on | Cost, ARV, and exit | Stabilized rent vs. full payment |
| Term | 6-18 months, interest-only | 30-year fixed spine |
| Best for | Distressed or rehab purchases | Rent-ready, stabilized property |
| Rehab money | Funded in draws | Generally not funded |
| Typical purchase leverage | See cost tiers above | Most files 75%-80% LTV |
If the property is rent-ready, a long-term DSCR purchase may skip the short-term stage entirely. Likewise, comparing hard money with an LLC cash-out refinance fits investors who already own equity.
Hard money is the stronger tool when the property needs work before any lender will treat it as a rental. A flip loan and a DSCR loan are not interchangeable: one underwrites ARV, cost, and exit, the other underwrites rent against the monthly obligation.
How to Strengthen the Application
A few steps tend to move files:
- Get an itemized scope of work with costs per phase.
- Pull resale and rental comps that back your ARV without stretching.
- Organize an experience schedule with addresses and outcomes.
- Document proof of funds for cash to close and reserves.
- Form the entity first, then contract in its name.
- Order title early and confirm insurance before closing.
- Write the exit down, including a fallback if the first plan slips.
Honestly, the strongest single move is a conservative ARV. Most late-stage surprises come from valuation, and a low-ball estimate you beat is safer than a hopeful one you miss.
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.
Frequently Asked Questions
What credit score do I need for a hard money purchase?
A 620 minimum is typical, with additional conditions below 660. Underwriting stays asset-based, so the property, plan, and exit carry the file, but score can still affect leverage and terms. Varies by lender, property, and experience.
Can a first-time investor qualify?
Yes, at the lower leverage tiers. A first-timer with fewer than 2 completed projects typically sits at up to 85% of project cost, still capped at 75% of ARV. More cash in and a detailed scope of work help the file.
Do I need an LLC?
Not always, but many investors use one. Entity-titled loans are available subject to lender program eligibility, and lenders will review the operating agreement, EIN, and good standing. Forming the entity before the purchase contract avoids mismatches.
Does hard money cover 100% of the purchase?
No. There is no true 100% purchase program. Up to 100% of the rehab budget can fund in draws against completed work, but the investor still brings cash toward the purchase and closing costs.
What happens if I can’t pay off on time?
Terms run 6-18 months with a balloon payoff, so a late exit is a real risk. Investors who need longer runway typically refinance into long-term rental financing rather than extend. Talk to the lender before the term ends, not after.
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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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. CFPB – Truth in Lending Act summary
2. Compliance Alliance – Regulation Z and investment properties
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money vs Bank Loan Requirements for a Rental Purchase · Hard Money Loan Proof of Funds Requirements for a Cash Offer · Hard Money Bridge Loan Requirements for a 2-4 Unit Property
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
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- 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.