The Quick Read: Hard money is a loan, not cash, but a well-documented hard money file can still support an offer on a cash-preferred listing. Lenders underwrite the property, the project plan, the exit, and the borrower’s own cash, and the seller wants to see proof that those pieces are in place. Everything below varies by lender, property, and experience, and nothing is a commitment to lend.
- Hard money underwrites the asset and the exit, not rental income.
- Fix-and-flip leverage is tiered by completed projects and measured against project cost, capped at 75% of after-repair value.
- The borrower still brings cash for the gap, and sellers want to see it.
- A lender letter is not the same as proof of funds in the buyer’s own account.
- Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized.
Here’s the part that trips people up. A seller who writes “cash only” in a listing is asking for certainty. A hard money loan can supply a lot of that certainty, but it can’t supply all of it. Knowing where the gap sits is what keeps earnest money safe.
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.
What Hard Money Is, and What It Isn’t
Hard money is a short-term loan secured by real property, priced higher than conventional financing because the term is short and the risk is higher, as Corporate Finance Institute explains. The loan sizes off the collateral. That’s the “hard” part: a hard asset backs it. The industry has also drifted toward calling this private, bridge, or transitional lending, per Wikipedia’s entry on commercial hard money.
A true cash buyer pays from their own liquid funds. No lien, no appraisal, no lender review. A hard money buyer has a lender in the middle, which means a lien, a note, recording documents, and a valuation step. That’s a financed purchase that closes in a cash-like way. Not the same thing.
| Factor | True cash | Hard money |
|---|---|---|
| Funding source | Buyer’s own funds | Private lender plus buyer’s cash |
| Valuation step | None | Appraisal or broker opinion |
| Lien on property | None | Yes |
| Proof needed | Bank statement | Lender letter plus bank statement |
| Repayment | None | Short term, then sale or refinance |
Why Sellers Ask for Cash
Sellers ask for cash because financed deals fall apart. Appraisals come in low. Inspections stall. A lender changes its mind. Institutional sellers feel this most, since they’ve been burned by buyers who promised funds they couldn’t deliver.
So the seller’s real question isn’t “is it cash?” It’s “will this close?” Hard money answers that question when three things hold: the lender focuses on the property rather than on the borrower’s paycheck, the buyer shows real cash for the portion the loan doesn’t cover, and the offer is written honestly.
How Hard Money Underwriting Actually Works
Underwriting runs on the deal. A lender looks at what the property is worth as-is, what it will be worth after repairs, what the project costs, and how the borrower gets out. The inputs are the purchase contract, the rehab scope, the budget, and the exit plan.
Leverage is where files get misread. Hard money is quoted against cost, not just value. On the programs Lendmire places, typical fix-and-flip leverage looks like this, and it varies by lender, property, and experience:
| Experience level | Leverage on fix-and-flip |
|---|---|
| 5+ completed projects | Up to 93% of project cost |
| 2+ completed projects | Up to 90% of project cost |
| Fewer than 2 | Up to 85% of project cost |
Every tier is capped at 75% of after-repair value. The lower of the two tests controls. Bridge purchases without rehab run up to 80% of purchase price. Cash-out and rate-and-term refinances run up to 65% of value. Ground-up construction reaches up to 90% of cost and 75% of completed value at 3+ completed projects. Rehab money, up to 100% of the budget, funds in draws against completed work. That is a rehab-budget figure, not a purchase leverage figure.
Notice what this isn’t. There is no true 100% purchase program.
Other terms to know across the network:
- Loan amounts run up to $5,000,000, larger by exception, and smaller balances vary by lender.
- Terms run 6 to 18 months, interest-only, with no prepayment penalty. No multi-year options exist on the current program.
- Credit minimum is typically 620, with added conditions below 660. First-time investors qualify at the lower leverage tiers.
- Collateral is non-owner-occupied residential, 1 to 4 units, and ground-up construction up to 10 units.
- Not offered: commercial, industrial, land or lots, hospitality, owner-occupied.
- The program is available in 41 markets, including Washington, D.C., but not in Louisiana, Minnesota, North Dakota, South Dakota, Baltimore, Chicago, or Detroit.
Key Terms Defined
After-repair value (ARV): The estimated value of the property once the planned rehab is finished.
Loan-to-cost (LTC): The loan amount as a share of the total project cost, meaning purchase price plus rehab budget.
Proof of funds: A document, usually a bank statement, showing liquid money the buyer controls.
Pre-approval letter: A lender’s statement that it expects to fund a deal, which doesn’t obligate it to do so.
Commitment letter: A binding lender promise to fund, subject to its stated conditions.
Exit strategy: The planned repayment route, usually a sale or a refinance into long-term financing.
What the Seller Sees vs. What the Lender Needs
This is the bridge most investors never build. Every lender requirement produces a document, and some of those documents double as seller-facing proof.
| Lender looks at | Document it produces | Seller sees it? |
|---|---|---|
| Property value and ARV | Appraisal or broker opinion | Rarely |
| Borrower’s cash | Recent bank statement | Yes, redacted |
| Experience | Completed-project list | No |
| Credit | Credit report | No |
| Exit plan | Rehab scope and refinance plan | No |
| Lender intent | Pre-approval letter | Yes |
| Entity | Operating agreement, EIN letter | Sometimes |
The seller usually sees two things: the lender letter and the bank statement. Both matter. The letter shows a lender is prepared to fund this specific purchase. The statement shows the buyer holds the gap. A proof of funds letter in the strict sense reflects liquid money the buyer controls, which is why a lender letter alone often falls short on cash-only listings.
The Readiness Checklist
Do this before you write the offer, in this order.
1. Pick the lender and get the pre-approval letter. It should name a maximum amount, carry as few conditions as possible, and be dated. Stale letters get rejected.
2. Pull a recent bank statement. It must show the cash for your down payment and closing costs, in the same name as the buyer on the offer. Redact the account number.
3. Organize entity documents. If an LLC is buying, have the operating agreement, EIN letter, and certificate of good standing ready, subject to lender program eligibility. A name mismatch between the offer, the statement, and the letter is a classic snag.
4. Prepare the property package. Purchase contract, rehab scope, budget, and comparable sales supporting the after-repair value.
5. Document your track record. Completed projects set your leverage tier. Have addresses, purchase and sale details, and photos ready.
6. Brief the title company. Tell them a lender is involved before the offer goes in, not days before closing.
7. Set the reserves. Lenders often want to see cash beyond the down payment. Requirements vary by lender and file.
Writing the Offer Honestly
Practitioners split on how to write a hard money offer. Some write it as a financed offer with a contingency. Others write it cash-style and disclose the private lender in the special stipulations, attaching the lender letter. Either route works when the facts are accurate. What doesn’t work is calling a financed purchase “cash” and hoping nobody asks.
The reason is practical. A lender pre-approval doesn’t obligate the lender. If appraisal or diligence goes sideways and the offer promised no financing risk, the buyer is exposed to losing earnest money. A financed offer written plainly protects the deposit better than a cash label that can’t be defended.
For listing agents reviewing these offers, the clean version includes the lender letter, a redacted statement for the gap, a named title company that knows about the lien, and wording that matches the actual funding source. Offers like that give the seller fewer questions to chase.
Where the General Rule Breaks
Bank-owned and institutional sellers. These often want proof of funds in the buyer’s name. A lender letter without a statement may be rejected. Expect to show both.
Funds held in investment accounts. Some buyers liquidate and show a fund manager’s letter. Only liquid funds count as proof.
Wholesalers. Without their own funds or a partner’s, a wholesaler can’t make a credible hard money offer. A lender letter doesn’t create money that isn’t there.
Pre-approval vs. commitment. A pre-approval can be withdrawn. A commitment is a firmer promise. Know which one you’re holding.
Owner-occupant buyers. Hard money is business-purpose, non-owner-occupied financing. A primary residence isn’t eligible.
Appraisal and inspection. These can still derail a financed deal. A low valuation cuts the loan under the leverage caps, and the buyer covers the gap.
Lender variation. Some quote leverage against value, others against cost. Ask which, every time, because the two produce very different numbers on the same file.
A Worked Example
Run this as a modeled scenario, not a market quote. An investor has completed three projects and finds a distressed house listed cash-only. The lender’s leverage test is 90% of project cost, and the 75% after-repair-value cap sits above that. The investor shows a pre-approval letter and a redacted bank statement covering the remaining cost share plus closing costs. The title company is told about the lender on day one of the contract.
Now change one input. The appraiser’s after-repair value comes in lower than the investor projected. The 75% ARV cap becomes the binding test, the loan shrinks, and the investor’s cash requirement grows. Files that pencil only at the top leverage tier are the ones that stall here. Build the budget so it survives the ARV test, not just the cost test.
The Exit: Where DSCR Fits
Hard money is acquisition debt. The term is 6 to 18 months, so the exit is the real risk. A failed or delayed takeout, with interest still running, is how a good rehab turns into a bad outcome.
For rental investors, the usual exit is long-term financing. Many investors refinance out of hard money into a DSCR loan once the property is renovated and leased. That loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire brokers that path, and the complete DSCR loans guide walks through how it works.
One caution. Clearing 1.00 coverage isn’t the same as positive cash flow. The ratio compares rent to the full monthly housing obligation only. Repairs, vacancy, management, and utilities sit outside it.
When Not to Use This Approach
Skip hard money for a cash-only listing if the exit isn’t mapped, if the budget only works at the top leverage tier, or if you can’t show the gap in your own account. The cost of a short-term loan stacks on top of any delay. A deal that needs everything to go right is a poor candidate.
If the lender declines, the options are a lower-leverage structure, a larger cash contribution, a partner with funds, or a different property. A decline on one property often reflects the asset or the plan, not you.
Frequently Asked Questions
Is hard money considered cash?
No. It’s a financed purchase with a lien, a note, and a valuation step. It can make an offer cash-like when the lender letter and your own funds are documented and the offer is written truthfully.
Do I need good credit for hard money?
Credit matters less than on conventional loans, but it isn’t ignored. A 620 minimum is typical on the current program, with added conditions below 660. Underwriting stays centered on the property, the plan, and the exit.
How much cash do I need beyond the loan?
It depends on your experience tier. Fix-and-flip leverage runs up to 85%, 90%, or 93% of project cost depending on completed projects, always capped at 75% of after-repair value. The balance, plus closing costs and reserves, comes from your own funds. Terms vary by lender, property, and experience.
Can an LLC use hard money for a cash-style offer?
Yes, subject to lender program eligibility. Have the operating agreement and EIN letter ready, and make sure the entity name matches the offer, the bank statement, and the lender letter.
What happens if the appraisal comes in low?
The loan shrinks under the cost and ARV caps, and you cover the difference or renegotiate. This is why financed offers carry more risk than true cash, and why honest contract wording matters.
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.
Tax treatment varies; consult a qualified professional.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
Many investors treat hard money as the acquisition tool and plan the exit up front – see the hard money loan overview.
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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. Corporate Finance Institute: Hard money loan
2. Wikipedia: Commercial hard money
3. Real Estate Skills: Proof of funds letter
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 Roll Closing Costs Into Hard Money on a Flip? · Can You Use a Hard Money Loan to Buy and Flip a House? · Can You Get a Hard Money Loan Without Owning a Business?
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.