How To Qualify for Hard Money Loan: 6 Requirements

Soaring home prices are enabling real estate investors to sell and rent out spaces for higher prices – attracting an increasing number of individuals to the market. In fact, in 2021, over 300,000 homes were flipped and, in the fourth quarter alone, 18% of homes were purchased by investors.

Whether seasoned or just getting started investing in real estate, hard money loans can help you achieve your business goals. Their flexibility and short closing periods can improve your bottom line while helping to maintain your financial security. 

Understanding how to qualify for a hard money loan can speed up your next real estate venture. Knowing how to get a hard money loan – including specific hard money loan requirements – is one of the first steps to ensuring a smooth process.

Table of Contents: 

How Does a Hard Money Loan Work?

If you’re new to the world of hard money loans, you may be asking yourself questions like, “Do hard money lenders require down payment?” or “What is a hard money loan?”

A hard money loan is a type of loan provided by private lenders. Their short-term  nature – typically lasting anywhere from 1 – 3 years – can provide adequate funding for various real estate ventures, including fix and flips, ground up construction, and land purchases.  

The approval process for hard money loans is often much quicker than that of traditional loans. Traditional lenders can take weeks or months to approve an investment loan. Hard money loans from private lenders can close within a few days to a week. 

Many hard money lenders only require monthly interest payments until the end of the loan’s life cycle, at which point you’ll be required to pay the full loan amount.

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Hard Money Loan Requirements

Although private lenders sometimes look at credit history as a qualifying factor for hard money loans, other requirements often play a larger role in helping you qualify. 

Hard money loan terms and requirements vary by lender. However, common requirements include:

  1. Adequate Down Payment: Down payments for most hard money loans range from 10% – 50% of the cost of purchasing the investment property, land, or building construction.

  2. Additional Funds: Some lenders like to see a cash reserve to ensure funds are available for additional fees or items that go over budget. 

  3. Equity: Most private lenders look to real estate equity as a type of collateral for hard money loans. In some cases, equity in multiple properties can act as such collateral.


Revolution Realty Capital offers hard money loans in the form of fix and flip, ground up construction, and small balance commercial loans. Below is a snapshot of specific requirements for each.

 

Fix and Flip Loans

Ground-Up Construction Loans

Small Balance Commercial Loans

Type of Space
  • Single-family
  • Multi-family
  • Mixed-use
  • Single-family
  • Multi-family
  • Mixed-use
  • Multi-family
  • Mixed-use

Down Payment

15% minimum 20% minimum 25% minimum
Origination Fee 2% 2% 2%
Rates Starting at 7.99% Starting at 8.49% Starting at 8.49%

 

These requirements are a few of the quantitative measures looked at before you can secure a hard money loan. However, there are other, more qualitative items lenders also look at before accepting loan applications.

What Do Hard Money Lenders Look For?

Lenders want to ensure their money will be paid back in full before lending financial capital. They’ll often look at the entirety of a project and its potential success before approving a loan application. Some of these requirements may include collateral, an exit strategy, and your previous experience in real estate.

  1. Collateral: For most hard money loans, the property you’re purchasing will be used as collateral. If you don’t pay the interest or make the agreed-upon payments, the lender can repossess the property to pay off the money borrowed. 

  2. Exit strategy: An exit strategy outlines how you plan to repay the loan. This could entail selling the property once you’ve made updates, using another loan to repay the initial hard money loan, or refinancing with a traditional mortgage. 

  3. Experience in real estate: Borrowers with more real estate experience are often a lower risk to lenders and will have an easier time securing a hard money loan. It’s not impossible to be approved for a hard money loan if you don’t have experience – but it likely will be more difficult. 

Knowing how to qualify for a hard money loan can get you through the process quicker and with fewer hiccups. Before applying, however, make sure you understand the ins and outs of the loan – including how much you’ll pay in interest.

Hard Money Loan Rates

Standard interest rates for hard money loans typically range between 8% – 15%. Because they’re short-term and riskier than a traditional mortgage loan, hard money loans often have higher interest rates. The length of your loan, the amount you’re borrowing, and the type of property it’s for will all affect this rate. 

Interest rates for fix and flip loans through Revolution Realty Capital start at 7.99%, while ground up construction and small balance commercial rates start as low as 8.49%.

Hard Money Mortgage Lenders

Finding the right hard money lender can be the difference between a profitable real estate project and a losing one. When looking for a lender, it’s a good idea to consider whether the lender is a broker or not, any personal credit of theirs, and if there is any additional support or technology that is provided with the loan. 

At Revolution Realty Capital, you can secure a hard money loan in 42 of 50 states, while also benefiting from the knowledge and experience of experts in the industry.

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Now that you know how to qualify for hard money loans, it’s time to shop around for the best hard money lender for you. Whether you’re looking for a small balance commercial loan or another hard money loan, Revolution Realty Capital provides some of the most competitive rates in the industry. 

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Daniel William

Co-Foundet Acme Corp

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