If you’re a real estate investor, you already know that speed and flexibility can make or break your deal. That’s why many investors turn to hard money lenders instead of traditional banks. But here’s the big question: what do hard money lenders actually look for in a borrower?
Unlike banks, hard money lenders aren’t bogged down by strict credit requirements, months of underwriting, or endless red tape. Instead, they focus on what really matters: the deal itself, the collateral, and your ability to execute.
The Property: Collateral Is King
Hard money lenders are primarily asset-based lenders. This means they’re more concerned about the property you’re buying than your W-2 income or your credit history.
Loan-to-Value (LTV) Ratios
Many lenders will fund up to 65–75% of the property’s after-repair value (ARV).
Example:
If you’re buying a fixer-upper for $150,000 and the projected ARV is $250,000, a lender may finance the purchase plus some or all of the rehab costs, as long as the numbers make sense.
Exit Strategy Matters
They’ll also ask: How are you going to pay off this loan?
- Flipping in six months?
- Refinancing into a long-term DSCR loan?
Having a clear, realistic exit strategy increases lender confidence.
Illustration:
- Investor A: “I just like the house and figured I’ll flip it somehow.”
- Investor B: “Purchase price $180K, rehab $40K, ARV $300K. I’ll list at $299K with comps to back it up.”
👉 Investor B gets the loan every time.
Experience Level of the Investor
Hard money lenders want to know if you can actually pull off the project.
- First-Time Investor? You can still get funded, but lenders may be more conservative with loan amounts or require you to work with an experienced contractor.
- Seasoned Investor? If you’ve successfully completed multiple flips or rentals, lenders may offer higher leverage, lower rates, and faster approvals.
💡 Pro Tip: Keep a portfolio of past projects with before-and-after photos and profit numbers. This builds instant credibility.
Skin in the Game
Lenders want to see that you’re financially invested. Rarely do they fund 100% of the purchase price (though some do for repeat borrowers or in certain markets).
- Typical expectation: 10–20% of the purchase price or covering part of the rehab upfront.
Example:
On a $200,000 property, you may need to bring $20,000–$40,000 to the table.
Credit Score: A Tie-Breaker, Not a Deal-Breaker
Credit scores matter, but they aren’t the deciding factor.
- A higher score (680+) can get you better terms.
- A lower score doesn’t usually disqualify you, but you’ll need stronger collateral and a solid plan.
Think of credit as a “tie-breaker” between borrowers with otherwise equal deals.
The Rehab Plan
If your project involves renovations, lenders want to see the details.
Scope of Work
Be specific: Are you doing cosmetic updates, structural changes, or a full gut rehab?
Timeline and Budget
A vague budget like “about $20K to fix it up” is a red flag.
A detailed plan like “$7,500 kitchen, $4,000 bathroom, $2,500 flooring, 60-day timeline” builds confidence.
Market Conditions
Even the best deal can fall apart if the market is weak. Lenders will look at:
- Comparable sales (comps) in the neighborhood
- Market demand (Are homes moving quickly or sitting for months?)
- Local economic growth (job growth, rental demand, population trends)
If your project is in a strong, active market, lenders are much more likely to fund.
Communication & Professionalism
How you present yourself matters.
- Respond quickly to calls and emails
- Have documents ready (purchase contract, rehab budget, comps)
- Be clear and confident about your plan
An investor who submits a clean, organized loan package almost always gets approved faster than one who drags their feet.
Quick Checklist: What Hard Money Lenders Look For
✅ Strong property with a solid ARV spread
✅ Clear exit strategy
✅ Experience or a reliable team
✅ Financial contribution (“skin in the game”)
✅ Detailed rehab plan
✅ Good communication and professionalism
Final Thoughts
Hard money lenders don’t just fund deals—they fund people who can execute deals.
If you want to win with hard money financing, come prepared with your numbers, comps, rehab plan, and exit strategy. The more confident you make the lender feel, the faster you’ll close and the more deals you’ll secure.