Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The Quick Read: An investor with no completed flips can still apply for a hard money loan, but the cash ask is larger than the down payment alone. Lenders size the loan to project cost and after-repair value, and a first-timer lands in the lowest leverage tier. The borrower must also show closing costs and reserves. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
- Fix-and-flip leverage typically runs 85% of project cost with fewer than two completed projects, always capped at 75% of after-repair value.
- Experienced tiers reach 90% of project cost at two or more projects and 93% at five or more.
- Bridge purchases without rehab typically go up to 80% of purchase price.
- Up to 100% of the rehab budget funds in draws against completed work. That is a rehab figure, not a purchase LTV.
- Reserves, fees and first-draw money sit on top of the down payment, and all of it varies by lender, property, and experience.
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.
Most first-time flippers budget for the down payment and stop there. That is where files stall. This article walks through how a hard money lender sizes the loan, what the full cash stack looks like, and where the rules bend. Lendmire is a broker that arranges these loans through select lenders in its wholesale network, across 41 markets, including Washington, D.C.
What Is Hard Money, and Why Does Flip History Matter?
Hard money is short-term, asset-based lending secured by the property itself. The lender looks at the property, the plan, and the exit more than at personal income.
Flip history matters because the plan is the risk. A lender funding a rehab is betting that you will finish on budget and sell or refinance. Someone with prior completed projects has shown they can. Someone without has not. So the lender does not usually refuse the file. It lowers leverage and asks for more of your own money in the deal.
Across Lendmire’s network, loans are business-purpose, for non-owner-occupied residential property of one to four units, with terms of 6 to 18 months, interest-only, and no prepayment penalty. Credit starts at a 620 minimum, with added conditions below 660. First-time investors qualify at the lower leverage tiers. Everything here varies by lender, property, and experience, and nothing is a commitment to lend.
Key Terms Defined
Loan-to-cost (LTC): The loan as a share of purchase price plus rehab budget.
After-repair value (ARV): The property’s estimated value once the work is finished.
Binding constraint: Whichever cap, cost-based or ARV-based, produces the smaller loan.
Reserves: Liquid funds you hold after closing to cover interest-only carry and early project costs.
Seasoning: How long funds have sat in your account, which helps show they are yours.
Draw: A release of rehab money after a milestone of work is done.
How Is the Down Payment Set With No Flip History?
The down payment is whatever the lender will not fund. With fewer than two completed projects, the tier is 85% of project cost, so the investor brings roughly 15% of cost plus whatever the ARV cap squeezes out. Both tests apply every time.
Here is the sequence underwriting follows:
1. Add up project cost. Purchase price plus rehab budget.
2. Apply the cost tier. Fewer than two completed projects means 85% of project cost.
3. Apply the ARV cap. The loan cannot exceed 75% of after-repair value.
4. Take the lower number. That is the binding constraint.
5. Check how rehab is funded. Up to 100% of the rehab budget is released in draws against completed work, so you often front the contractor and get reimbursed.
6. Subtract the loan from total cost. The gap is your equity in the deal.
Run it on a modeled deal. Assume a purchase price of $200,000, a rehab budget of $60,000, and an ARV of $330,000. Project cost is $260,000. The cost tier at 85% of project cost is the first test. The ARV cap at 75% of $330,000 is the second. When a modest ARV makes the second test bite, it controls and your cash goes up. When the ARV is generous, the cost tier controls. Either way, a first-timer should expect the more conservative result.
This is also why borrower cash in the deal matters. A discount on the purchase price helps the math, but lenders generally want to see cash from your own savings too.
Compare that with a refinance. Cash-out and rate/term refinances on this program go up to 65% of value, and the bridge-purchase tier without rehab goes up to 80% of purchase price. Neither is a flip structure, so they do not reward or punish flip history the same way.
There is no true 100% purchase program. When you see 100% financing language, it is almost always the rehab budget funding in draws, not the purchase.
What Are Reserves, and How Much Do You Need?
Reserves are liquid funds left in your accounts after closing. They show staying power: that you can carry interest-only payments and start work before the first draw arrives. They are not spent at closing, but they must be there.
There is no single number. Reserve rules vary by lender, leverage, and loan size, and one lender may ask for more than another on the same deal. Ask about reserve rules before you pay for an appraisal, not after.
A practical way to size them is to take your own carrying cost, the monthly interest, taxes, insurance and any assessments, and multiply by the months the project could realistically run. Add a cushion for the gap before the first draw. Budgets that assume everything goes to plan are the ones that stall.
Why do lenders ask more of a first-timer? Execution risk. A new flipper is more likely to hit overruns and delays, and a longer carry eats the cushion. Larger reserves are the lender’s way of pricing that in without refusing the loan.
For context on what reserves mean in mainstream mortgage lending, Fannie Mae’s guidance on minimum reserve requirements defines liquid post-closing reserves, measured in months of payment, with funds to close subtracted. That is a different market with its own rules, and it does not govern hard money. Still, it shows the shared idea: reserves are liquid, verified, and separate from the funds needed to close. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
What Counts as a Reserve Asset?
Plain cash in a bank or brokerage account counts everywhere. After that, treatment depends on the lender.
| Asset | Typical treatment | Caveat |
|---|---|---|
| Checking and savings | Generally accepted | Recent statements required |
| Brokerage holdings | Often accepted, sometimes discounted | Value can move |
| Retirement accounts | Varies by lender | Often discounted or excluded |
| Home equity | Generally not counted | Equity is not liquid cash |
| Borrowed funds | Often not accepted | Source-of-funds review applies |
Retirement balances show how much treatment differs. Hard money lenders set their own policies, so ask the specific lender instead of assuming the same answer.
Borrowed money is the trap. Some first-timers try a business card or a personal loan for the down payment. Lenders that review the source of funds may object, and a deposit you cannot explain can derail the file.
How Do Documents and Seasoning Work?
Expect to prove three things: the cash is yours, it has been there, and it is enough. In practice that means two to three months of bank statements, entity documents, insurance, title work, and a scope of work. Fannie Mae’s guidance on verifying deposits and assets shows the same bank-statement logic in the mainstream market.
Seasoning is the has-it-been-there test. Hard money lenders handle this unevenly. Some do no formal seasoning and simply want a statement showing cash to close, while others look harder. Clarify the specific lender’s approach before you apply.
Large deposits draw questions. A transfer between your own accounts is easy to explain with both statements. A lump sum from an unclear source is not. Keep a paper trail for anything that is not a paycheck.
Contracts and the loan should sit in the name of the purchasing entity, so the funds, the contract and the borrower all line up. An LLC borrower works on many files, subject to lender program eligibility.
Worked Example: Total Cash for a First-Time Flipper
Total cash has four parts, and the down payment is only one.
| Bucket | What it covers |
|---|---|
| Down payment | Project cost not funded by the loan |
| Closing costs | Title, fees, taxes, insurance, points |
| Holding costs | Interest, utilities, insurance during the work |
| Reserves and first-draw money | Staying power; fronting the contractor |
Take the modeled deal above and a second one where a different test binds. In the modeled deal, 85% of the $260,000 project cost comes to $221,000, while 75% of the $330,000 ARV comes to $247,500. The cost tier gives the smaller loan, so it controls and the down payment is about 15% of cost. In the second deal, a more moderate ARV means the 75% ARV cap controls, so the down payment is larger than the cost tier alone implies. In both, the investor still funds closing costs and carries reserves.
The lesson: an investor who budgets only the 15% can be short by a wide margin. Add every bucket before you make an offer.
Where the General Rule Breaks
Reserve rules are not standardized. One investor may be asked for reserves above closing funds and holding costs, while another lender asks for none. Lenders should disclose this early.
Experience is not always a hard gate. Some lenders will fund a first deal. Some institutional funds want a track record. The leverage tier is the usual lever, not a yes-or-no wall.
Gap funding. Second-position funding to cover the equity gap exists but is scarce for new investors, and the first-lien lender must permit it. Lendmire’s piece Larger Hard Money Loan vs Gap Funding for a Flip’s Down Payment compares the two routes.
Partnering. Teaming with an experienced operator is the common workaround for a thin record. It can raise your tier, at the cost of sharing the profit.
Property type. Collateral is non-owner-occupied residential of one to four units, with ground-up construction up to 10 units. Commercial, industrial, land, hospitality and owner-occupied property are not offered.
Footprint. The program is not available in Louisiana, Minnesota, North Dakota, South Dakota, or in Baltimore, Chicago, or Detroit.
What If You’re Short on Cash?
You have options, and each has a cost.
- Shrink the project. A smaller rehab lowers cost and reserves, but it may lower the exit value.
- Add a partner. More cash and a stronger record, but a share of the upside.
- Add equity first. Waiting and saving costs time but improves every tier.
- Raise your credit profile. The 620 minimum has added conditions below 660, so moving past that line helps.
Skip anything that pays for equity with borrowed money. It tends to fail the source-of-funds review.
Why Do Online Answers Conflict?
Some pages say reserves hardly matter, others call them decisive, and some advertise zero down. They differ because lenders differ. A local private lender funding on a strong ARV may care little about reserves. An institutional fund buying the loan will care a lot. Zero-down pages are usually sales copy for rehab funding, not the purchase.
Across a wholesale network, the comparison is easier to see. Most programs reward experience with leverage, and the strictest overlays want visible cash and a clear plan. The useful comparison points are leverage tier, reserve rule, seasoning, and draw process.
Common Reasons First-Timers Stall
- Budgeting the down payment but not reserves or fees.
- A weak or optimistic ARV that pulls the loan under the cost tier.
- A thin scope of work without contractor quotes.
- Unexplained deposits or borrowed funds.
- Contracts signed in a personal name instead of the entity.
What Happens After the Flip or Rehab?
Hard money is short, so the exit is the plan. It is a sale or a refinance. Many investors who keep the property refinance out of hard money into long-term DSCR financing once it is stabilized, and Lendmire brokers that path. A DSCR loan looks at value, rent coverage, credit and reserves rather than flip history. The complete DSCR loans guide explains how that stage works.
One caution: clearing a coverage ratio is not the same as positive cash flow. The ratio compares rent to the monthly obligation only. Repairs, vacancy, management and capex sit outside it.
Readiness Check
Before you chase a deal, confirm you can answer yes to each:
1. Do I know my project cost and a defensible ARV?
2. Have I computed both the cost-tier and ARV-cap loan, and taken the lower?
3. Can I cover the down payment, closing costs and holding costs from my own funds?
4. Do I have reserves held separately, with statements to show them?
5. Is my scope of work detailed, with contractor quotes?
6. Is my exit a sale or a refinance I can actually qualify for?
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. You can call 828-256-2183 or request a quote.
Frequently Asked Questions
Do I need flip experience to get a hard money loan?
Not always. Experience mostly sets your leverage tier. With fewer than two completed projects, fix-and-flip leverage typically runs 85% of project cost, capped at 75% of after-repair value. Some lenders want a track record, so it varies by lender, property, and experience.
Are reserves part of the down payment?
No. The down payment is the share of cost the loan does not cover. Reserves are separate liquid funds you keep after closing to carry interest and start the work. Closing costs and holding costs are separate again.
Can I use retirement funds or a credit card?
Retirement funds may count, sometimes at a discount, depending on the lender. Borrowed money is often rejected during a source-of-funds review. Ask the specific lender before you rely on either.
Can closing costs be financed?
Usually you should plan to pay them from your own funds. Treat them as a separate cash bucket from the down payment and reserves.
What happens if my reserves drop mid-loan?
Reserves are verified at the start, so the key risk is a stalled project, not an automatic default. Overruns eat the cushion, though, and a shortfall can strain your ability to carry interest and pay contractors before reimbursement. Size the buffer generously.
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 for DSCR loans, 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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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 B3-4.2-01: Verification of Deposits and Assets
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 · Hard Money Bridge Down Payment Requirements for Out-of-State Investors · How a Hard Money Lender Counts a Seller-Financed Down Payment
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.