The Quick Read: Lenders underwrite the property and the plan rather than your paycheck. They weigh as-is value, after-repair value (ARV), the equity cushion, your experience and liquidity, a minimum credit score, and whether your exit by sale or refinance is believable. Leverage and terms vary by lender, property, and experience, and nothing here is a commitment to lend.
- Value comes first: the lender sizes the loan against the as-is value, the ARV, and project cost, and funds the lesser of the limits.
- Experience sets the tier: fix-and-flip leverage steps up with the number of completed projects.
- Credit still counts: a 620 minimum score applies, with additional conditions below 660.
- Rehab money arrives in draws against completed work, not as a lump sum at closing.
- The exit is underwritten as hard as the purchase.
What Hard Money Underwriting Actually Checks
Hard money is short-term, asset-based lending. The property and the business plan lead the file, and your income plays a small role. That does not mean the borrower is ignored. Lenders still look at credit, background, experience, and cash on hand.
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.
Think of it as five questions. What is it worth today? What will it be worth after the work? How much of the lender’s money is protected by your equity? Can you actually execute? And how does the loan get repaid?
| Factor | What the lender evaluates | What to bring |
|---|---|---|
| As-is value | Condition and comps today | Contract, photos |
| ARV | Comp-supported finished value | Comps, scope of work |
| Leverage | Loan against cost and ARV | Cash for your share |
| Borrower | Credit, experience, liquidity | Track record, statements |
| Exit | Sale or refinance realism | Written exit plan |
Across the wholesale network Lendmire works with, the files that go smoothly bring all five in one clean package. Files that stall usually have a good deal and a thin story.
How the Lender Values the Property
The lender wants two numbers: the as-is value and the ARV. An appraisal sets them, and sometimes a broker price opinion (a lighter valuation) stands in for a full appraisal. Ask which one your lender uses before you pay for anything. Hard money lenders typically pass the appraisal cost to the borrower.
ARV is where deals live or die. A believable ARV rests on recent, similar sales near the property, not on the best comp you could find. An underwriter will haircut a stretched number. When that happens, the loan shrinks, and your required cash grows.
Budget credibility matters just as much. A lender-ready rehab budget is itemized, matches the scope of work, and supports the ARV. Nobody wants to fund a $40,000 plan that clearly needs $70,000.
How Loan Sizing Works
Lenders size a flip against two ceilings at once: a share of project cost (purchase plus rehab) and a share of ARV. The loan is the lesser of the two. The tiers below come from the program the network offers, and they vary by lender, property, and experience.
| Transaction | Typical maximum |
|---|---|
| Fix-and-flip, 5+ completed projects | 93% of project cost |
| Fix-and-flip, 2+ completed projects | 90% of project cost |
| Fix-and-flip, fewer than 2 projects | 85% of project cost |
| All flip tiers | Capped at 75% of ARV |
| Bridge purchase, no rehab | Up to 80% of purchase price |
| Cash-out or rate/term refinance | Up to 65% of value |
| Ground-up construction, 3+ projects | Up to 90% of cost, 75% of completed value |
Loan amounts run up to $5,000,000, with larger balances by exception. Smaller balances vary by lender.
Here is the sizing logic as a hypothetical. Treat project cost as 100. Assume the lender applies the 90% tier. Then test three different ARVs.
| ARV as % of project cost | 75% of ARV, as % of cost | Cost-based limit | Binding limit |
|---|---|---|---|
| 115% | About 86% | 90% | ARV cap (about 86%) |
| 125% | About 94% | 90% | Cost cap (90%) |
| 135% | About 101% | 90% | Cost cap (90%) |
At a thin 115% margin, the ARV cap binds, and your cash requirement rises. At 125% and up, the cost tier binds. This is why a modest drop in appraised ARV changes the loan more than most investors expect. Lenders look hard at thin margins for exactly this reason.
One more thing about the 100% figure you may have seen. Up to 100% of the rehab budget can fund through draws. That is a rehab-budget figure, not a purchase loan-to-value. There is no true 100% purchase program, and the top tier is reserved for experienced investors.
What About the Borrower?
Credit. A 620 minimum score applies, with additional conditions below 660. Credit works more like a structure lever than a pass-fail gate. A stronger score and a longer track record tend to support stronger terms.
Experience. Completed projects move you up the leverage tiers. First-time investors qualify at the lower tiers, and lenders often ask them for a tighter budget, contractor details, and more equity.
Liquidity. Your cash has to cover your equity share, closing costs, carrying costs, and the gap between draws. Draws usually reimburse finished work, so you front the money first. Plan for inspection fees on each draw too.
Entity and background. Expect a credit pull and background check up front, so problems surface early. Many investors borrow through an LLC, subject to lender program requirements. The lender will ask for the entity documents and, typically, a personal guarantee.
Step by Step: From Intake to Approval
1. Intake. You send the address, contract, scope of work, and your experience. Have the lender review the deal before you commit to the contract.
2. Document package. Typical asks: a track-record summary, a personal financial statement, the budget and scope, entity documents, and bank statements.
3. Credit and background. The lender runs both early.
4. Valuation. The appraisal sets as-is value and ARV. Terms lock once those are fixed.
5. Sizing. The lender applies cost and ARV limits and funds the lesser.
6. Underwriting and approval. The file is reviewed as a whole: borrower, property, and exit. A final committee vote usually follows.
7. Conditions. Clean title and insurance binding come before funding.
8. Holdback and draws. The rehab budget sits in escrow and is released against inspected work, backed by a contractor draw schedule.
9. Payoff. You repay by sale or refinance. Payments are interest-only during the project.
Terms run 6 to 18 months, interest-only, with no prepayment penalty, though this varies by lender. There are no multi-year options on the current program. If you need longer runway, you refinance into long-term rental financing.
Where the Rules Break
Most edge cases come down to property type, purpose, or sequence.
- Property eligibility. The collateral is non-owner-occupied residential, 1 to 4 units, and ground-up construction goes to 10 units. Commercial, industrial, land or lots, hospitality, and owner-occupied properties are not on the sheet.
- Lien position. Hard money is typically a first lien. If you lack the equity for a first-lien position, expect a pass.
- Draw rules. Some lenders release part of the budget early. Draw terms are not standardized, so read them.
- Heavy rehab. A vacant or heavily damaged property usually cannot qualify for rent-based financing yet. Investors use hard money first, then refinance once the property is stable.
- Footprint. Programs are available in 41 markets, including Washington, D.C., so confirm your property’s location early.
The business-purpose line
These are business-purpose investor loans on non-owner-occupied property, so they are reviewed differently from a standard owner-occupied mortgage. The CFPB’s Regulation Z commentary exempts credit extended primarily for a business purpose. It also says the creditor must decide the primary purpose in each case. A loan can even become consumer credit if it is later refinanced into a consumer-purpose obligation.
The exemption turns on purpose, not on the label “investment property.” Compliance Alliance makes the same point. That is why lenders ask for a business-purpose statement and entity paperwork. One construction wrinkle: the RESPA temporary-financing exemption does not cover 1-4 family construction loans that convert to permanent financing with the same lender.
Is the Exit Really Underwritten?
Yes. The loan is short, so the take-out is part of the file. A lender wants to see a sale price supported by comps, or a refinance that the stabilized property can realistically qualify for.
Many investors refinance out of hard money into long-term DSCR financing once the property is stable, and Lendmire brokers that path. DSCR (debt service coverage ratio) compares the rent to the full monthly housing payment. Clearing a coverage target is not the same as positive cash flow, since repairs, vacancy, management, and capex sit outside the calculation. For the mechanics, see the complete DSCR loans guide.
How Do Files Get Approved, Restructured, or Declined?
Underwriting rarely ends in a flat yes or no. Four outcomes are common.
- Approved. The numbers, borrower, and exit all line up.
- Approved with conditions. Title cleanup, insurance, a revised budget, or added cash.
- Restructured. An ARV haircut or a lower tier shrinks the loan, so you bring more equity.
- Declined. Usually a stretched ARV, a thin margin, weak comps, title defects, an unrealistic scope, or no believable exit.
Optimistic ARV is the classic failure. So is undocumented liquidity. Fix those two before submitting and the rest tends to fall into place.
Self-Check Before You Submit
Run your own deal through this list.
- Can you support the ARV with recent, similar sales?
- Does the itemized budget match the scope of work?
- Does your equity cover the cost-based and ARV-based limits?
- Is your cash documented for equity, carry, and draw gaps?
- Is your credit at or above 620, with a plan if it sits below 660?
- Do you have entity documents and a short track-record summary?
- Is the property 1-4 units, non-owner-occupied, and in a served market?
- Is your exit written down, with a backup?
Missing two or more? Fix them first.
Key Terms Defined
- Hard money loan: A short-term, interest-only business loan secured mainly by the property rather than your income.
- ARV (after-repair value): The property’s estimated value once the planned work is finished.
- As-is value: What the property is worth today, before any work.
- Loan-to-cost: The loan as a share of purchase price plus rehab budget.
- Draw: A release of rehab funds after the lender inspects completed work.
- Holdback: The rehab money the lender escrows and releases in draws.
- DSCR: A ratio comparing a rental’s income to its full monthly debt payment.
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. Any calculator on the site is an illustrative estimate only.
This article is general information, not legal or tax advice. Consult a qualified attorney or CPA about your own situation.
Frequently Asked Questions
Do hard money lenders check credit?
Yes. Underwriting stays asset-based, so the property, the plan, and the exit carry the most weight, but credit and background are still reviewed.
Can a first-time flipper qualify?
Often, at the lower leverage tiers. With fewer than 2 completed projects, flip leverage tops out at 85% of project cost. Expect to show a detailed budget and more cash in the deal. Terms vary by lender, property, and experience.
Is 100% financing a real option?
Not for the purchase. Up to 100% of the rehab budget can fund through draws against completed work, but the purchase portion is capped by the tiers above. Every flip tier is also capped at 75% of ARV.
What happens if the appraisal comes in below my ARV?
The ARV cap shrinks the loan, and you cover the difference. That is why thin-margin deals are the most sensitive to valuation.
Is there a prepayment penalty?
Not on the current program. Terms run 6 to 18 months, interest-only. Some lenders elsewhere do charge one, so confirm in writing.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
Hard money often opens the deal, and a refinance typically closes the chapter – 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. CFPB – Regulation Z, Section 1026.3 (official interpretation)
2. Compliance Alliance – Regulation Z and Investment Properties
3. Cornell LII – 12 CFR 1024.5
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 Use Hard Money on a Two to Four Unit Multifamily Property? · Can a 1099 Contractor Get a Hard Money Loan to Flip a House? · Can You Buy a Flip in an LLC With a Hard Money Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.