The Quick Read: Vetting a hard money lender comes down to two jobs: asking questions that expose the real cost, leverage basis, draw rules, and exit terms, and assembling a file that proves the borrower, the entity, the cash, the property, and the renovation plan, with requirements that vary by lender, property, and experience.
- Leverage is usually sized on project cost and capped against after-repair value, so ask which number governs.
- Rehab money sits in a holdback and is released in draws after completed work, so the investor often fronts the cash.
- The file centers on the property, the plan, and the exit. Personal income paperwork usually plays a smaller role.
- Written answers beat verbal ones. Compare two lenders on the same questions, in writing.
- Many flips end in a refinance, so the exit question belongs on the first call.
What a Hard Money Fix and Flip Loan Actually Is
A fix and flip loan is short-term financing used to buy a property, renovate it, and sell or refinance it. Industry guides to fix and flip lending describe these as small-business loans that are typically secured by the property being bought and renovated. They also note that early payoff often carries no penalty.
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 description fits the network Lendmire works with. The loan is asset-based. The lender cares about what the property is worth after the work, whether the budget is realistic, and how the borrower will repay.
Lendmire is a broker. It arranges these loans through select lenders and does not make the credit decision itself. The brokerage’s footprint for these programs covers 41 markets, including Washington, D.C.
Typical program parameters run like this, always varying by lender, property, and experience, and never a commitment to lend:
- Collateral: non-owner-occupied residential property, one to four units. Ground-up construction runs to ten units.
- Terms: 6 to 18 months, interest-only, with no prepayment penalty.
- Loan size: up to $5,000,000, larger by exception. Smaller balances vary by lender.
- Credit: a 620 minimum score, with added conditions below 660.
Commercial, industrial, land, hospitality, and owner-occupied properties are not part of this program.
How Underwriting Treats the File, Step by Step
Underwriting follows a fixed sequence: screen the lender, submit the package, get the scope and budget approved, value the property, size the loan, close, then fund rehab through draws. Each stage has its own questions and its own paperwork, and mixing them up is how files stall.
| Stage | Ask the lender | Have ready |
|---|---|---|
| Screening call | Fee basis, leverage basis, extensions | Rough scope, purchase price |
| Term sheet | Written cost breakdown | Entity details, credit pull consent |
| Underwriting | What value method they use | Contract, budget, proof of funds |
| Closing | Which items are still open | Insurance, title items, signed docs |
| Draws | Inspection and payout steps | Photos, invoices, lien waivers |
| Payoff | Exit terms, payoff process | Sale contract or refinance plan |
The sequence matters because the scope of work is often the first document a lender studies. It shows whether the budget is believable, supports the after-repair value, and sets how draws are structured.
Lenders then size the loan against three measures at once: loan-to-cost, loan-to-value, and after-repair value. The tightest one governs. A borrower who only compares headline leverage numbers can miss that.
Questions to Ask, Grouped by What They Protect
The best questions test cost, leverage basis, draw mechanics, and exit terms. A good answer is specific and written down. A warning answer is vague, verbal, or changes when you press for detail.
| Question | Strong answer | Warning sign |
|---|---|---|
| Is leverage on cost or value? | Names both and which caps | “We’ll figure it out” |
| Are fees on purchase or whole loan? | States the basis in writing | Won’t itemize |
| Does interest run on drawn funds only? | Clear yes or no | Unclear until closing |
| Is there a prepayment penalty? | Stated in the term sheet | Hedged answer |
| What is the extension process? | Terms listed up front | Decided case by case |
| How are draws inspected and paid? | Steps and contacts named | No process described |
| What if the property doesn’t sell in time? | Written extension path | Silence or pressure |
Three of these questions change the true cost more than the headline price does.
Fee and interest basis. Origination fees can be calculated on the purchase price only or on the entire loan, including the rehab holdback. Interest can accrue on funds actually drawn, or on the full commitment from day one. On a slow project, that difference becomes large. Ask for both answers in writing.
Value method. Ask whether the lender uses an appraisal or a broker price opinion, and what happens if the number comes in low. A low value can reduce the loan amount directly, because the after-repair cap is the tightest limit on most files.
Exit and extensions. Ask what happens if the sale or refinance runs past the term. Lenders underwrite heavily to the after-repair value and the project schedule, so a lender who dodges this question is telling you something.
This article focuses on pairing each question with the paperwork that backs it.
The Document Checklist and Why Each Item Exists
Every document answers a lender question: who is borrowing, what is the property, where is the cash, and what is the plan. Knowing the purpose lets you prioritize, and it lets you fix gaps before submission instead of after.
| Document | Why the lender needs it | Common mistake |
|---|---|---|
| Government ID | Confirms the signers | Expired or mismatched name |
| Entity papers, EIN, operating agreement | Confirms who owns the loan | Entity formed after contract |
| Experience summary | Sets the leverage tier | Missing dates or outcomes |
| Purchase contract | Fixes the price and parties | Unsigned or incomplete |
| Scope of work and budget | Tests feasibility and draws | Lump-sum budget |
| Value support or comps | Backs the after-repair value | Cherry-picked sales |
| Proof of funds | Shows cash for the down payment and carry | Partial bank statements |
| Insurance and title items | Protects the collateral | Ordered too late |
Why a line-item budget beats a lump sum. A line-item budget lets the lender match each draw to a completed task. A lump sum gives the lender nothing to inspect against, so it raises questions.
Why full statements beat partial ones. Lenders want to see where the cash came from. Missing pages create follow-up requests, and unexplained deposits create more.
The business-purpose piece. Hard money loans are business-purpose investor loans, reviewed differently from a standard owner-occupied mortgage. Under CFPB Regulation Z §1026.3, credit extended primarily for a business purpose is generally exempt from Regulation Z. The CFPB’s TILA examination procedures say the primary purpose is decided case by case, and a checked business-purpose box with no documentation of how the proceeds will be used may not be enough. That is why entity papers and a clear project file are standard.
A note on entities. Loans to LLC-titled borrowers are generally welcome, subject to lender program eligibility. A newer entity can work, but form it and get the EIN before you sign the contract so the names match across every document.
Structures and Variations That Exist
Leverage on these programs is tiered by experience and sized on project cost, not purchase price alone. The top tier is reserved for investors with documented completed projects.
| Structure | Typical ceiling | Basis |
|---|---|---|
| Fix and flip, 5+ completed projects | 93% | Of project cost, capped at 75% of ARV |
| Fix and flip, 2+ completed projects | 90% | Of project cost, capped at 75% of ARV |
| Fix and flip, fewer than 2 | 85% | Of project cost, capped at 75% of ARV |
| Bridge purchase, no rehab | 80% | Of purchase price |
| Cash-out or rate/term refinance | 65% | Of value |
| Ground-up, 3+ completed projects | 90% | Of cost, 75% of completed value |
Up to 100% of the rehab budget can be funded in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value. No true 100% purchase program exists, so be wary of anyone who advertises one. All figures vary by lender, property, and experience.
Here is how the cap works in practice. Say a deal’s total project cost equals 80% of the after-repair value. At the 90% cost tier, the loan lands at 72% of ARV, which clears the cap. If total cost equals 85% of ARV, 90% of cost would reach 76.5% of ARV, so the 75% cap binds and the borrower brings more cash. Always run both tests.
A purchase-only loan looks different. It has no scope of work, no draw schedule, and usually no inspection. The borrower funds the entire rehab out of pocket. The loan still requires appraisal, title, insurance, entity documents, proof of funds, and credit.
Where the General Rule Breaks
Most of these loans follow the pattern above. A few situations bend it.
- First-time flippers. They typically qualify only at the lower leverage tier, so the cash-to-close question matters more than the headline structure.
- Credit between 620 and 660. Files can work, but expect added conditions. A stronger score does not erase the leverage tiers, which are driven by experience.
- Rural or thin markets. Some lenders cut leverage or decline outside major metros. If the property sits outside one, ask early.
- Individual versus entity. The ABA Banking Journal explains that an LLC guarantor does not change the purpose analysis for a loan made to an individual. The loan’s purpose and the borrower type decide it, not the guarantee.
- Owner-occupied or consumer use. Those fall outside this program. The collateral must be non-owner-occupied investment property.
- Low appraisal. The loan amount can shrink because the value cap controls. Ask what the lender does if the value misses, before you pay for the valuation.
- Budget overruns. Draws fund the approved budget. An overrun comes out of the investor’s pocket unless the lender approves a change in writing.
One pattern shows up often across the wholesale network. Files stall less on credit than on paperwork: a lump-sum budget, partial bank statements, or an entity that does not match the contract. The investors who move smoothly tend to assemble the whole package before they make an offer.
Draws and Payoff: Where the Paperwork Continues
Funding does not end at closing. Purchase money goes out at closing, while rehab money sits in a holdback and is released after completed, inspected work.
A typical draw package includes photos, contractor invoices, and lien waivers, along with permits and any approved change orders. Liens, missed payments, and permit problems are the usual causes of a held draw.
Because draws are reimbursements, the investor often fronts the labor and material costs. Liquidity for the down payment, closing costs, and carry is the real gate on many deals, more than the headline price.
At payoff, the borrower repays by sale or refinance. Many investors refinance out of hard money into long-term DSCR investor loans once the property is leased and stabilized. That loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire brokers that path, and it is worth asking about before you take the short-term loan.
Fixing a Weak File
A weak file is usually fixable before submission. These are the common gaps and the usual repairs.
| If you’re missing | Usual fix |
|---|---|
| Track record | Bring a clean experience summary, or accept the lower tier |
| Line-item budget | Rebuild from contractor bids |
| Full bank statements | Pull every page, explain large deposits |
| Seasoned entity | Form it early and align all names |
| Strong value support | Add recent, similar sold comps |
| Reserves | Document cash beyond the down payment |
Red Flags
Legitimate lenders ask for documents tied to the file in front of them. Be careful when a lender asks for sensitive items early, before a term sheet exists, or when fees cannot be itemized in writing.
Other warning signs: refusing to name the fee basis, promising approval before reviewing the property, or pressuring you to skip a valuation. No credible hard money program offers no-credit-check, no-review approval. Underwriting stays asset-based, but it is still underwriting.
Key Terms Defined
After-repair value (ARV): the estimated value of the property once the renovation is finished.
Scope of work (SOW): a line-item description of the planned repairs and their costs.
Loan-to-cost: the loan amount as a percentage of the total project cost, including purchase and rehab.
Draw: a release of holdback funds after a stage of completed, inspected work.
Proof of funds: documents showing the cash for the down payment, closing costs, and carrying costs.
Holdback: rehab money set aside at closing and paid out in draws.
What the Decision Looks Like in Practice
Picture an investor with one prior flip and a clean budget. Because that investor has fewer than two completed projects, they still sit in the lower leverage tier, so the cash-to-close number deserves the most scrutiny. The strongest play may be to compare two lenders on fee basis and interest method before comparing anything else.
Now picture a more experienced investor with several completed projects. The leverage tier is better, but the cap against after-repair value can still bind. For that investor the key questions concern value method and extension terms, because those drive risk on a larger project.
Either way, the decision comes down to three checks: Does the leverage basis fit the deal? Do the draw rules match the project’s cash flow? Is there a written exit path if the schedule slips?
Frequently Asked Questions
Do hard money lenders check personal income?
Underwriting centers on the property, the renovation plan, and the exit, so personal income paperwork usually plays a smaller role. Requirements still vary by lender. Expect to document entity papers, a budget, proof of funds, insurance, and title items regardless.
Can a first-time flipper qualify?
Often yes, at the lower leverage tier. On the program parameters above, borrowers with fewer than two completed projects typically see up to 85% of project cost, capped at 75% of after-repair value. Credit starts at a 620 minimum, with added conditions below 660. Terms vary by lender, property, and experience.
Is an LLC required?
Not always, but many investors use one. Entity papers, an EIN, and an operating agreement are standard when the borrower is an entity. Keep names consistent across the contract, insurance, and loan file.
What if the appraisal comes in low?
The loan amount can drop, because the value cap is usually the tightest limit. Ask before ordering the valuation what the lender does in that case, and whether you can bring added value support.
Do I get all the rehab money at closing?
No. The purchase portion funds at closing, and rehab money sits in a holdback released through draws after completed work. Up to 100% of the rehab budget can be covered in draws on these programs, subject to lender guidelines.
Your 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. Reach the team at 828-256-2183 or through the Lendmire quote page. For a broader view of long-term rental financing after the flip, see the complete DSCR loans guide.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
2. CFPB TILA examination procedures
3. ABA Banking Journal on LLC guarantors
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 You Get a Hard Money Loan Without Owning a Business? · Can an Investor Find a Hard Money Lender for a Fix and Flip? · Can a 1099 Contractor Get a Hard Money Loan to Flip a House?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.