Hard Money Loan Requirements: What Lenders Check and How to Qualify

How hard money lenders decide: the deal first, the borrower second

A bank mortgage is built around you: your W-2 income, your debt-to-income ratio, two years of tax returns. A hard money loan is built around the property and the plan for it. The lender’s first question is not “Can this person afford the payment for 30 years?” but “If this borrower walks away in month four, can we recover our money from this house?”

That is why hard money loan requirements look different from conventional ones. Most private lenders underwrite four things, roughly in this order:

• The asset: the purchase price, the as-is value, the after-repair value (ARV), and the location.
• The plan: the rehab or construction budget, the timeline, and how you will repay the loan (sale or refinance).
• Your capacity: cash to close, reserves, and your track record on similar projects.
• Your credit profile: score, recent late payments, foreclosures, bankruptcies, liens and judgments.

Every lender weights these differently. One lender may accept a 620 credit score on an experienced flipper’s fifth deal; another may require 680 for anyone. That variation is the main reason it pays to see several quotes side by side rather than assuming the first “no” is the market’s answer.

The rest of this guide walks through each requirement, with typical ranges, a worked example, and a document checklist. Treat the numbers as common market patterns, not rules: every lender publishes or applies its own guidelines.

Hard money loan credit score requirements

Credit matters less for a hard money loan than for a conventional mortgage, but it rarely doesn’t matter at all. Many lenders set a minimum somewhere in the 600s, and pricing often improves in tiers as the score rises past roughly 680 or 700. A few lenders advertise no minimum score and focus almost entirely on equity, but those loans usually come with lower leverage, higher rates, or both.

What lenders look at beyond the number

• Recent mortgage lates. A 30-day late on a mortgage in the last 12 months often weighs more than a lower score from old credit card debt.
• Foreclosures, short sales and bankruptcies. Many lenders want a seasoning period (often two to four years) after these events, or a written explanation.
• Open liens and judgments. Unpaid tax liens or judgments can attach to property and complicate title, so lenders usually want them resolved or explained.
• Background checks. Lenders commonly run background and fraud checks on each guarantor, since the loan is often personally guaranteed.

Most lenders use a soft pull to quote and a hard pull before closing, but practices vary, so ask. The Consumer Financial Protection Bureau has a plain-language overview of credit reports and scores, including how to request free reports and dispute errors. Pulling your own reports before you apply lets you clean up mistakes before a lender sees them.

If your score is lower than you’d like

A lower score usually changes the terms rather than killing the deal. Expect a lower loan-to-cost, an extra point at closing, or a higher rate. Bringing a partner with stronger credit as a co-guarantor is another common path, though that partner takes on real liability.

Down payment: how much skin in the game lenders expect

Hard money lenders rarely lend 100% of the purchase price. Most cap the loan with several limits at once and lend the lowest result. The common ones are:

• Purchase loan-to-cost: often 80–90% of the purchase price, so you bring 10–20% of the purchase.
• Rehab funding: often up to 100% of the approved rehab budget, paid in draws after work is completed.
• Loan-to-ARV: often capped around 65–75% of the after-repair value.

Our guide to LTC vs LTV vs ARV explains each ratio in detail. Here is how they interact on a hypothetical flip.

Worked example

Say you are buying a house for $200,000 with a $50,000 rehab budget and an appraised ARV of $340,000. The lender offers 90% of purchase, 100% of rehab, and a 70% loan-to-ARV cap.

• 90% of the $200,000 purchase = $180,000
• 100% of the $50,000 rehab = $50,000
• Total by cost = $230,000
• 70% of the $340,000 ARV = $238,000

The lower figure wins, so the maximum loan is $230,000. Your down payment is the $20,000 gap on the purchase. If the ARV had come in at $310,000 instead, the ARV cap would drop to $217,000 and you would need to bring an extra $13,000. You can test your own numbers with the ARV max loan calculator linked at the end of this guide.

New investors should expect the lower end of these ranges. A first-time flipper might see 80–85% of purchase instead of 90%, which on the same deal means a down payment of $30,000 to $40,000 before closing costs.

Experience requirements and track record

Experience is one of the biggest pricing levers in private lending. Lenders typically ask for a track record: a list of properties you have bought, renovated or built, and sold or refinanced, usually within the last three years. They may verify it with settlement statements or public records.

Many lenders sort borrowers into tiers along these lines:

• No completed projects: lower leverage, higher rate or points, tighter rehab scope limits, sometimes a requirement to hire a licensed general contractor.
• A few completed projects: standard terms on typical cosmetic or moderate rehabs.
• Many completed projects: the best leverage and pricing, larger loan sizes, and more tolerance for heavy rehabs or ground-up construction.

What counts as experience varies. Some lenders count rental properties you renovated and held; some count projects where you were a partner in the LLC; some count only flips you closed in your own name or entity. Ground-up construction loans often require construction-specific experience or a builder with a verifiable history.

Having no track record does not disqualify you everywhere. Our guide to getting a hard money loan with no experience covers how first-time investors usually structure their first deal, including partnering and using a contractor with a strong history.

Property requirements: what kinds of deals qualify

The lenders described on this site focus on 1–4 unit residential investment property: single-family houses, condos and townhomes in some cases, and duplexes through fourplexes. Common property requirements include:

• Non-owner occupied. You cannot live in the property. Lenders usually ask you to sign a business-purpose and non-owner-occupancy certification.
• Business purpose. The loan must be for an investment, not a personal residence.
• Insurable and marketable. The property needs a clear path to title insurance and hazard insurance; flood insurance may be required in a designated flood zone.
• Location. Many lenders lend only in certain states, and some exclude rural properties, very low-value properties, or markets with thin sales data.
• Minimum value or loan size. Lenders often have a minimum loan amount, which can rule out very inexpensive houses.

The business-purpose requirement matters legally, not just as a formality. The federal Truth in Lending Act’s Regulation Z generally exempts credit extended primarily for a business or commercial purpose; the CFPB publishes the text of that exemption in 12 CFR 1026.3. That is one reason hard money lenders insist on investment use: many consumer mortgage rules are built for owner-occupied homes. State laws vary, and some states regulate business-purpose lending too.

Older houses can raise extra requirements. Renovation contractors working on pre-1978 homes generally must follow the EPA’s Renovation, Repair and Painting rule for lead-safe work practices, and some lenders ask about it in their scope review.

Entity requirements: LLCs, EINs and personal guarantees

Most hard money lenders prefer, and many require, that you borrow through a legal entity such as an LLC or corporation rather than in your personal name. Expect to provide:

• Formation documents: articles of organization and a certificate of good standing from your state.
• Operating agreement: showing who owns the entity and who can sign for it.
• EIN: the entity’s federal Employer Identification Number. The IRS explains how LLCs are treated for federal tax purposes and how to get an EIN.
• Personal guaranty: owners above a set percentage (often 20–25%) are typically asked to personally guarantee the loan.

An LLC does not mean you avoid personal liability on the loan. With a full recourse guaranty, the lender can pursue the guarantor if the sale of the property does not cover the debt. Read the guaranty carefully, and talk to your own attorney and tax advisor about how to set up the entity.

A practical tip: form the LLC and open its bank account before you go under contract. Lenders typically want to see the closing funds sitting in an account they can verify, and moving money at the last minute raises sourcing questions.

Cash to close and reserves

A lender that doesn’t check your income will still check your cash. Expect to show bank or brokerage statements, often the two most recent months, covering:

• Your down payment
• Points and lender fees, usually a percentage of the loan plus flat underwriting or processing fees
• Title, escrow, recording, insurance and other third-party closing costs
• Reserves, often a few months of interest payments, and sometimes a share of the rehab budget

Worked example, continued

Using the same hypothetical $230,000 loan at 11% interest with 2 points and a $1,500 lender fee, assuming roughly $4,000 in third-party closing costs:

• Down payment: $20,000
• Points (2% of $230,000): $4,600
• Lender fees: $1,500
• Third-party closing costs (assumed): $4,000
• Cash at closing: about $30,100

If interest is charged only on funds drawn, the first month’s payment on the initial $180,000 balance is about $1,650. A lender asking for three months of reserves at the fully drawn balance ($230,000 × 11% ÷ 12 ≈ $2,108 a month) would want roughly another $6,300 on hand, bringing your verified liquidity to about $36,400. Try your own figures in the cash-to-close calculator.

Also plan for rehab float. Draws are usually reimbursements after an inspection, so you or your contractor often need to fund each phase of work before the lender releases money.

Deal-level requirements: scope of work, valuation and exit

A strong borrower with a weak deal still gets declined. Lenders usually want three things on the deal itself.

A detailed scope of work

A line-item budget (demo, roof, HVAC, electrical, plumbing, kitchen, baths, flooring, paint, landscaping, contingency) with a timeline. Lenders compare it against the ARV and against their own sense of local costs. Unrealistically low budgets are a common red flag, because an underfunded rehab is the most common way a flip stalls.

A supportable valuation

Most lenders order an appraisal, broker price opinion or internal valuation with both an as-is value and an after-repair value. Our guide on how hard money lenders calculate ARV explains how comps are chosen and why a lender’s ARV can come in below yours.

A believable exit

For a flip, the exit is a sale; for a rental, it is usually a refinance into a long-term loan. If you plan to refinance, lenders may check that the projected rent supports a debt service coverage ratio loan afterward; a refinance lender will look closely at rent, not just value. The term of the hard money loan, often 6 to 18 months, should comfortably cover the work plus time to sell or refinance.

Hard money loan document checklist

Every lender’s list differs, but a typical file for a fix and flip or bridge loan includes:

• Loan application and signed credit authorization for each guarantor
• Government-issued photo ID for each guarantor
• Entity documents: articles, operating agreement, EIN letter, good standing certificate
• Executed purchase contract, including any assignment
• Scope of work and rehab budget, plus contractor information if required
• Track record (property addresses, purchase and sale dates and prices)
• Two months of bank statements showing cash to close and reserves
• Insurance quote or binder naming the lender as mortgagee
• Exit plan summary, and for refinances, a payoff letter on the existing loan

The lender will usually order its own appraisal or valuation and title work. Having the borrower-side items ready before you sign a purchase contract is the single best way to close quickly, which in competitive markets can be as important as price.

Common reasons hard money applications get declined

• The numbers don’t work. The purchase plus rehab is too close to the ARV, leaving no margin for the lender.
• Low valuation. The appraiser’s ARV comes in well below the borrower’s estimate, shrinking the maximum loan.
• Not enough verified cash. Funds can’t be sourced, are in someone else’s name, or arrived as an unexplained large deposit.
• Scope beyond experience. A first-time investor proposing a gut renovation or an addition.
• Title or credit problems. Unresolved liens, recent foreclosures, or background check issues.
• Owner occupancy. Any sign the borrower intends to live in the property.
• Location or property type. Outside the lender’s footprint, rural, or a property type it doesn’t finance.

A decline from one lender is often a mismatch rather than a verdict. Different lenders have different appetites for experience levels, credit tiers, property types and markets.

How to qualify: putting it together

If you want to give yourself the best chance of approval and better terms, work through this sequence before you make an offer:

1. Check your credit. Pull your reports, fix errors, and prepare short explanations for any past problems.
2. Set up your entity. Form the LLC, get the EIN, and open a business bank account.
3. Season your cash. Keep down payment, closing costs and reserves in a verifiable account.
4. Document your track record. Build a simple spreadsheet of past projects with settlement statements.
5. Underwrite the deal like a lender. Estimate ARV from recent renovated sales and build a line-item budget with contingency.
6. Compare lenders. Look at rate, points, fees, leverage and how interest is charged, and estimate the total cost over your expected hold.

That last step is where Hard Money Lender Match is designed to help: you enter a deal once and see anonymized lender quotes with the rate, points, fees and estimated total cost side by side, then choose which lenders to talk to. Start with the fix and flip loans overview or go straight to the comparison tool.