The Quick Read: A hard money lender counts your assets as proof you can fund the deal and survive after closing, not as income. Cash counts at full value, investment and retirement accounts count at a discount, and anything you cannot document or access counts for nothing. Exact treatment varies by lender, property, and experience.
- Counts in full: cash in your name or your entity’s name, with clean statements behind it.
- Counts at a discount: brokerage and retirement balances, because they are harder to turn into cash.
- Often left out: business operating cash, gifts, borrowed money, and unexplained deposits.
- Never treated as income: assets show up as cash to close and reserves, not as a paycheck.
- Self-employment helps here: no tax-return income test means write-offs do not sink the file.
Why Does a Lender Count Assets If Income Isn’t the Test?
Hard money underwriting starts with the deal: the property, the plan, and the exit. Your assets answer a different question. Can you cover your share of the cost, and can you keep the loan current if the project runs long?
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.
That is why self-employed investors often find this process easier than a bank file. A bank wants two years of traditional personal-income documentation with the write-offs already subtracted. A hard money lender, for the most part, does not run that test. Across the wholesale network Lendmire works with, underwriting stays asset-based: property, plan, and exit.
Assets still matter in three ways:
1. Cash to close. The money you bring to the table at closing.
2. Reserves. The money left after closing that proves you can keep paying through a delay.
3. Source of funds. Proof that the money is really yours and came from somewhere legitimate.
Think of it as a liquidity check. The lender is not asking what you earn. It is asking what you could put your hands on this week.
Key Terms Defined
Liquidity: How much of your money you can turn into spendable cash without delay or loss.
Reserves: The cash left in your accounts after the down payment and closing costs are paid.
Haircut: The discount a lender applies to an asset that is not plain cash. A balance counted at a haircut is worth less on paper than on your statement.
Seasoning: How long money has sat in an account. Seasoned funds look like yours. Fresh deposits look borrowed.
Source of funds: The documented origin of a deposit, such as a sale, a distribution, or a paycheck-style transfer from your own business.
Loan-to-cost: The loan as a share of total project cost (purchase plus rehab), rather than a share of the property’s value.
Commingling: Mixing personal and business money in the same account so that no one can tell which is which.
PITIA: Principal, interest, taxes, insurance, and any association dues. It is the full monthly obligation on a long-term rental loan.
How Underwriting Counts Your Assets, Step by Step
The process follows a pattern across most programs. Details change by lender, but the sequence rarely does.
Step 1: The lender sizes your cash need. Hard money leverage is usually set against cost and tiered by experience. Fix-and-flip leverage runs up to 93% of project cost at 5 or more completed projects, 90% at 2 or more, and 85% with fewer than 2. Every tier is capped at 75% of after-repair value. These figures vary by lender, property, and experience. The gap between the loan and total cost is the cash you must bring, so a lower experience tier means more of your assets get tested.
Step 2: You hand over statements. Expect recent bank statements, plus brokerage or retirement statements if you want those counted. Every page must be included. A missing page is a common reason a clean file gets sent back.
Step 3: The lender ties the money to the borrower. The name on the statement has to match the borrower or the entity. An LLC borrower with funds sitting in a personal account needs paperwork connecting the two, subject to lender program eligibility on entity borrowers.
Step 4: Large deposits get sourced. Any deposit outside the account’s normal pattern needs a short explanation and a trail, like a sale document or a transfer record. Self-employed deposits are lumpy by nature, so expect more questions here than a salaried borrower would get.
Step 5: Cash to close comes out first. Down payment, closing costs, and any cash portion of the rehab are subtracted from your verified liquid balance.
Step 6: Whatever remains is measured as reserves. The lender compares the remainder with its target. Reserve rules vary by lender and by the size and type of the loan.
Step 7: Non-cash assets are haircut. Brokerage and retirement balances are discounted before they join the total. Lenders usually want a statement showing the vested balance.
The sequence matters because the same bank balance can pass or fail. Money committed to the down payment cannot also be reserves. Skip that subtraction and your own math will not match the lender’s.
The Asset-by-Asset Breakdown
Cash is simple. Everything else depends on how easily the lender can reach the value. This table shows typical treatment, which varies by lender.
| Asset | Typical treatment | What proves it | Self-employed watch-out |
|---|---|---|---|
| Personal checking/savings | Counts in full | Recent statements, all pages | Large deposits need sourcing |
| Entity (LLC) account | Counts if tied to borrower | Statements plus entity documents | Paperwork must tie the funds to the borrower |
| Business operating account | Often scrutinized or excluded | Statements plus access proof | Cash needed for payroll may not count |
| Brokerage account | Counts at a discount | Statement showing holdings | Market swings change the value |
| Retirement account | Counts at a larger discount | Statement of vested balance | Plan type affects access |
| Gift funds | Usually not allowed for reserves | Gift letter, if allowed at all | A family loan is still a loan |
| Borrowed or card cash | Treated as debt, not assets | Not accepted as assets | Moving it into checking does not fix it |
The pattern is simple. The easier an asset is to turn into cash, the closer it counts to face value.
Why Do Lenders Discount Retirement Accounts?
Pulling money out of an IRA before age 59½ generally triggers a 10% additional tax on top of regular income tax. A lender knows an early withdrawal would cost you real money. The haircut is its proxy for that cost.
It does not mean you have to withdraw anything. The statement is usually enough, and the underwriter applies a percentage to the vested balance. The amount of the discount depends on the lender, and the network figure belongs in a conversation about your specific file, not a guess here. Tax treatment varies; consult a qualified professional.
Plan type also matters. Some employer plans restrict access while the owner is still working there. A self-employed owner with a solo plan or an IRA often has a simpler path, though the lender still decides whether the balance is reachable.
Business Money vs. Personal Money
Business cash is the trickiest asset for a self-employed investor. It is real, it is often large, and lenders treat it with suspicion.
The concern is simple. If you pull cash out of the company to fund a purchase, can the company still run? A lender wants to see unrestricted access to the funds and some sign that taking them would not leave the business short.
Two habits keep this clean:
- Separate the accounts. If personal and business money mix in one account, the lender cannot tell what is yours. Commingling is a classic file-stall.
- Move funds in advance. Transferring money from the business to your personal or entity account well before you apply gives the deposit time to season. A transfer the week of the application looks like a scramble.
Do not count the same dollar twice, either. If a balance appears in both a business account and a personal account because you moved it mid-file, the lender counts it once.
A lender’s view of operating cash varies. Some ask for a short note on how the withdrawal affects the business. Others simply exclude operating accounts. Ask before you build your plan around those funds.
A Worked Example
Picture a self-employed investor who holds assets on three shelves. Scale them to 100 points of total value: 40 in cash, 20 in a brokerage account, and 40 in a retirement account. These are placeholders to show the logic, not program terms.
What the investor thinks they have: 100 points.
What the lender sees:
1. The 40 points of cash count in full.
2. The brokerage 20 points count at a discount.
3. The retirement 40 points count at a larger discount, based on the vested balance.
4. Cash to close comes out first, taken from the cash shelf because it is the easiest to prove.
5. What is left across all three shelves is measured against the reserve target.
The investor who sits near the line has a choice. They can bring less to the deal by using a higher-leverage tier, which requires more completed projects. Or they can season more cash. Either way, the lesson holds: retirement money helps, but it counts for less than it looks like on a statement.
Now flip it. An investor with the same 100 points, all in cash, would see almost all of it survive. That is the whole reason liquidity beats net worth in this world. (Many investors find this annoying. The lender does not.)
Where the General Rule Breaks
Rules of thumb break in a handful of predictable places.
Cash-out proceeds as reserves. On a refinance, some lenders let the loan’s own proceeds count toward reserves. Others do not. It is lender-specific, so ask before you assume.
Gift funds. Gifts are generally not accepted for reserves. Some lenders allow them toward the down payment. Treat that as the exception.
Borrowed money. Cash from a credit card or a personal loan is debt. Lenders generally treat it as debt rather than an asset, even after it passes through checking.
Proof-of-funds letter versus a fuller review. A proof-of-funds letter shows you have the money for an offer. A fuller pre-approval reviews statements in more depth. A seller’s agent often wants the statement attached to either one.
Hard money versus a long-term rental loan. Hard money is more deal-driven, and some lenders want only a basic proof of liquidity, with little attention to seasoning. Long-term rental financing tends to add seasoning and reserve tests. Treat both as lender-dependent.
Business-purpose slippage. Hard money and DSCR loans are business-purpose investor loans, so they are reviewed differently from a standard owner-occupied mortgage. The test looks at the occupation, the borrower’s personal involvement, and the stated purpose of the loan. Naming an LLC as guarantor does not turn a personal-purpose loan into a business one. The lender decides the purpose on each deal.
Hard Money, Bank Statement, and Asset Depletion: What Each Measures
These three paths get blurred together. They measure different things.
| Approach | What it measures | Where assets show up |
|---|---|---|
| Hard money | Deal quality and exit | Cash to close and reserves |
| Bank statement loan | Cash flow through accounts | Deposits as income evidence |
| Asset depletion | Assets turned into income | Balance converted to income |
Hard money counts assets for liquidity. Asset depletion converts them into a qualifying income figure. Those are different tools, and a lender running one is not running the other.
Where Does DSCR Take Over?
Hard money is short-term money. Terms typically run 6 to 18 months, interest-only, and the loan amount tops out around $5,000,000 on most files, larger by exception. Credit generally starts at a 620 minimum, with extra conditions below 660. All of that varies by lender, property, and experience.
Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. This is where your assets stop doing most of the work and the property’s rent starts. The lender checks whether rent covers the full monthly payment (the DSCR, or debt service coverage ratio), and it qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
Here is how that shifts the picture, based on the wholesale network:
- Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- Cash-out refinance: tops out around 75% LTV on most of the network, with about 6 months of seasoning as the common expectation.
- Reserves: commonly around 6 months of PITIA, though they vary by lender, leverage, loan size, and transaction type.
- Credit: most programs want around 660, and 700 or higher opens the strongest leverage tiers.
Your assets still matter at this stage, but as reserves, not income. Savings and retirement balances show up as proof you can carry the property. They do not replace the rent test. A strong file clears both: enough equity and enough rental coverage.
One warning. Clearing 1.00 is not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, and utilities sit outside it. The complete DSCR loans guide covers how the ratio works in full.
What to Fix Before You Apply
Preparation does more for a self-employed file than anything else. Here is the order that works.
1. Separate your accounts. Personal money in personal accounts, business money in business accounts, entity money in the entity account.
2. Decide which funds you will use. Pick the accounts that will carry cash to close and reserves, and leave them alone.
3. Move money early. Transfers from the business should season before the application, not during it.
4. Annotate unusual deposits. A one-line explanation and a document, like a sale record, beats an argument later.
5. Gather the statements. Every page, every account, names matching the borrower or entity.
6. Pull the vested balance. For retirement and brokerage accounts, get the statement that shows what is actually yours.
7. Ask the lender its rules. Haircuts, seasoning, and business-account treatment differ, so ask early.
A tidy file lets the lender read your finances instead of interrogating them.
Frequently Asked Questions
Do I need traditional personal-income documentation for a hard money loan if I’m self-employed?
Generally not as an income test, because hard money underwriting centers on the property, the plan, and the exit. Some lenders still ask for documents like a financial statement, entity papers, or bank statements. Requirements vary by lender, so confirm what your lender wants before you gather anything.
Will my retirement account count toward reserves?
Often yes, but at a discount. The lender applies a haircut to the vested balance, and you usually do not have to withdraw anything. Access rules vary by plan, so a solo plan and an employer plan can be treated differently. The size of the discount depends on the lender.
Does the cash in my business account count?
Sometimes, and sometimes not. Lenders tend to scrutinize operating accounts because pulling the money could hurt the business. Clear access, separate accounts, and a note explaining the withdrawal all help. Some lenders simply exclude operating cash, so ask first.
What happens if I have a big recent deposit?
The lender will ask where it came from. A sale document, a transfer record, or a short explanation usually settles it. Deposits that look like borrowed money are the real problem, since borrowed funds are generally treated as debt rather than assets.
Can the LLC’s money count if the loan is in my name, or the reverse?
It can, but you need paperwork tying the funds to the borrower. The statement name should match the borrower or entity. Entity borrowers are subject to lender program eligibility, so confirm which structures a lender accepts.
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 that arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Nothing here is a commitment to lend, and every file is underwritten individually.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
1. IRS Topic 557: Tax on Early Distributions from Traditional and Roth IRAs
2. CFPB Regulation Z, Section 1026.3: Exempt Transactions
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 to Exit Hard Money When Your Appraisal Falls Under All-in Cost · Hard Money vs Cash Purchase Requirements for a Rental Property · Can a Hard Money Lender Secure One Loan Across Multiple Properties?
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.