General Hard Money Loan Requirements

A hard money loan is a type of financing that is asset-based and gives the borrower funds that are secured by real property. This type of loan is generally meant to be temporary and can also be considered a bridge loan. The terms are primarily based on the collateral property value rather than on the borrower’s creditworthiness. A hard money loan can provide quick funding for projects that can’t be financed through conventional lenders. Even though this type of loan is easier to obtain than other private money loans, it does still have its own unique requirements, and approval is not guaranteed. Here’s what you should know about obtaining a hard money loan.

Down Payment

To be approved for a hard money loan, you generally need to have a down payment. Your lender will specify how large your payment needs to be.

Property Equity

If you don’t make a down payment, you may still be approved for a hard money bridge loan if you have enough equity in the property to serve as loan collateral. The amount of equity required for this type of funding is usually between 30-40 percent (for commercial) and 25-30 percent (for residential).

Property Plan

Most lenders will not grant hard money loan approval until they see the borrower’s plan for the property. If a borrower plans to improve the property then sell it for a profit, there is a better likelihood of the borrower being able to repay the loan than if they don’t have a clear plan for the property.

Find a Good Lender

Now that you know the benefits and general requirements of a hard money loan, it’s time to work on securing your financing through a reputable lender. For the best experience, look for a lender that has good reviews online and that has been in business long enough to become a leader in the industry.

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