As a real estate investor, you may not have the luxury of getting approved for a traditional small business loan. Whether it’s a low credit score, a spotty payment history, or lack of down payment, you may find it challenging to find financing. One option to consider: a hard money loan. In this article, we share what hard money loans are, how they work, and where to find them.

What Is a Hard Money Loan?

Hard money loans, also called bridge loans, are short-term funding used in real estate investment. The term “hard” refers to the hard asset — in this case, the property itself. Many investors use these loans to flip properties, and hard money lenders are private lenders (or private money lenders) looking for a high return without having to rehab or purchase a property themselves. They are most interested in the fundamentals of the deal: the property’s value or, in particular, the after-repair value (ARV).

The loan is based on what the lender believes the property will be worth in the future, which differs from traditional lenders who only look at the current value. So you may not need a good credit score to secure a hard money loan.

Do Hard Money Loans Require Down Payment?

Not always. Many real estate investors are looking for deals that involve no money down. That may be possible with private money loans if the fundamentals of the deal justify it. These are short-term loans so you may not even have to make monthly payments if you sell the investment property quickly enough. 

Looking for 100% financing? Hard money loans may be the answer so you don’t have to bring your own money to the deal. Note that some lenders may offer up to 90% to 100% of the purchase price and 100% of the rehab budget, as long as that will total less than 70% to 75% of the after repair loan-to-value (ARLTV)..

Do You Need Good Credit for a Hard Money Loan?

Not necessarily. With a hard money loan, the lender or investor is typically more interested in the property than in the borrower’s credit score. That makes it a more flexible option for some investors with bad credit scores. Some lenders require a credit check, though, and some have minimum credit score requirements. Make sure you understand the lender’s policy.

Of course, even if you don’t need a good credit score to qualify, good personal FICO scores and strong business credit can help you or your business qualify for more financing options.  Establish business credit as early as possible in your business journey.

Is There a Difference Between a Hard Money Business Loan and a Hard Money Real Estate Investor Loan?

A hard money business loan and a hard money real estate investor loan are two ways of saying the same thing. Hard money loans are used in real estate investment to allow borrowers to flip properties without having to fund the project completely by themselves. The investor conducts an appraisal to determine how much the property will be worth after it’s rehabbed. These loans are typically shorter term than traditional loan options and may come with a higher interest rate.

90 Percent LTV Hard Money Loans

A loan that is 90% loan-to-value (LTV) means that the lender is willing to fund 90% of the appraised future value. Remember, hard money loans rely on the value after repairs and rehab have been completed. So with a 90% LTV hard money loan, you’ll be responsible for funding the remaining 10% of the project.

80 Percent LTV Hard Money Loans

Similar to a 90% LTV loan, an 80% LTV hard money loan will fund only 80% of the loan-to-value. The lender considers what the potential value will be after renovations are complete. With this type of loan, you’ll need to bring a larger chunk of cash (the remaining 20%) to the table when you make the deal. 

Best Hard Money Loans for Real Estate Investors

Here are some of Nav’s top picks for best hard money lenders and fix & flip lenders. Find 100% financing with hard money loans.

Do Hard Money

Looking for 100% financing? Hard money loans might be the answer, and Do Hard Money should be one of your first stops. First off, they can actually do 100% financing for fix and flip projects, a rarity in the hard money sphere. They don’t require any credit or experience in the underwriting process, and don’t have a minimum requirement for a downpayment. 

As with any hard money lender, Do Hard Money can’t and doesn’t guarantee a profit on any flip, but they do report a healthy average profit of $33,578, a solid start for new flippers and a strong cog in the machine for experience flippers looking to add a chunk of cash to their business. 

Do Hard Money charges interest at a starting rate of 12% for the loan term, and doesn’t charge prepayment penalties. For qualifying and able borrowers, that can equal solid savings on interest and more money back into your business. 

Do Hard Money also boasts a slightly faster-than-average funding time of 12 days, meaning you can have the money for your project at least a few days faster than with other lenders. While Do Hard Money doesn’t require a minimum down payment, they will charge their fees up front, one of the main pain points for those who have had negative experiences with the lender. The company also can’t fund borrowers in every U.S. state.

Do Hard Money Rates and Terms

Property Types Financed	Non-owner occupied
Loan Amount	$50,000 – $5 million
ARV	70% (minimum of $75,000)
Interest Rates	Starts at 12%
Fees	Points: 5.5 to 6.5; no prepayment penalty
Loan Terms	No payment for the first five months
Time to Fund	Average of 12 days

LendingOne

While they don’t claim to be able to offer 100% fix and flip financing, LendingOne can cover up to 90% of purchase and rehab costs, up to $10 million. With an emphasis on user-friendliness, they add a level of simplicity to the application process. They offer loans for a range of deals, including foreclosures and mixed-use properties, but properties must be non-owner occupied

LendingOne’s Fix-and-Flip loans are advertised as “interest only” over a period of up to 24 months. Their interest rates may be lower than others in the fix-and-flip sphere, but you have to call to find the current rates. To qualify for the best rates and longest terms, you’ll want to come in with a personal credit score of at least 620 and have at least six months worth of cash reserves on hand. 

They also offer 10-day funding time on smaller unit fix and flips, but this time may be longer for long-term loans or for ground-up construction projects. Overall, the simplicity of the application process and overall solid terms make LendingOne a great option. 

LendingOne Rates and Terms

Property Types Financed	Non-owner occupied, also have rental property loans available
Loan Amount	$75,000 – $10 million
ARV	Up to 75%
Interest Rates	Not stated on the website
Fees	Origination fees from 1.75% to 3%
Loan Terms	Up to 24 months interest only
Time to Fund	As low as 10 days

Amza Capital

Amza Capital is one of the leaders in the hard money lending space, and has the specs to continue holding their own. They require a minimum personal credit score of 650 for consideration, and a higher score to qualify for some of their better terms and rates. 

They prefer to work with experienced flippers, so if this is your first time, be sure to work with a mentor or a licensed contractor to beef up your resume during the application process.

Amza also offers a fix and flip credit line with a much higher credit limit (up to $25 million), fixed rates and terms up to 24 months for flippers with multiple projects going on

With terms generally around 12 months, rates between 7% and 12%, and closing costs around $995, Amza should be on your mind when you’re looking for a lender. 

Amza Capital Rates and Terms

Property Types Financed	Non-owner occupied
ARV	Up to 80%
Interest Rates	7% to 12%
Fees	2% to 5%
Loan Terms	Up to 12 months
Time to Fund	2 weeks

How to Get 100% Financing With a Hard Money Loan

Not all hard money lenders offer the same types of loans to everyone. Hard money loans are a powerful tool for securing 100% financing, but not all borrowers will qualify. Here are a few ways to help ensure you get no down payment financing on your project.

1. Make sure your deal is less than 70% ARV. Your ARV, or after repair value, should be less than 70%. That includes the property purchase price, rehab and loan costs.
2. Maintain a solid credit score. While a good credit score is helpful to get a traditional loan, it’s also a good idea to have one for a hard money loan. You can still get a hard money loan with fair or poor credit, but you might not get 100% financing.
3. Gain experience. Many hard money lenders won’t give money to borrowers if it’s their first time flipping a house. Having the experience of house-flipping can be in your favor.
4. Be flexible in coverage. Some hard money lenders will cover the purchase price, but not other expenses (like repair costs, for example). You might have to cover some of the costs out of pocket (maybe business or marketing costs). With that being said, 100% financing might be different, depending on the lender.
5. Consider the limit. Don’t be surprised if a hard money lender has a maximum loan amount you can get. If your property is worth more than the limit, you might be able to get the max loan amount, but not have it cover all your necessary costs.

How to Fund Your Down Payment if Your Lender Requires One

Traditional mortgage lenders usually require a down payment. Hard money lenders aren’t obligated to, but some do. If your hard money lender requires some upfront cash, you could get it from a few different places, including:

Business credit cards

You may be able to use funds from a business credit cards either as a down payment or to finance repairs. Keep in mind that there are typically fees associated with taking out a cash advance, and APRs for cash advances are higher than what you’d pay on your regular purchases. Some credit cards offer 0% balance transfers for 6 to 18 months, and allow you to deposit those funds into your bank account. This can be a cost-effective way to help finance your property. (Remember that after you get your hard money loan, you’ll be responsible for paying back your loan as well as your advance at the same time.)

Personal loans

A personal loan can be used for anything, including a down payment on a home that you might not live in. Interest rates on personal loans are usually lower than those on credit cards, but they vary depending on your lender and creditworthiness. Personal loans heavily weigh your credit score when considering you as a borrower, which means that the lower your credit score, the higher your interest rate. Like a credit card cash advance, you’ll be paying off your personal loan as well as your hard money loan at the same time, which could mean your bank account can take a huge hit.

Family and friends

If you don’t have the financial history to prove your creditworthiness, you might have better luck with those that personally know you. Try asking family and friends for down payment cash. They’re more likely to be lenient on repayment options, which means you might not have to make two loan payments at the same time. Even so, you should have some sort of contract in place that details your loan, interest rate (if any), repayment plan, and any fees, if your loved ones want to implement them. Have a deadline in place so both you and your relatives know when the money should be paid back in full.

Home equity line of credit

A home equity line of credit (HELOC) can be helpful if you already have a primary residence. Your home is used as collateral, and there is less red tape to go through. Interest rates tend to be lower since your home is used to secure the loan, similar to a hard money loan. If you don’t make timely payments on your HELOC, though, your home can be seized. Use this if you’re confident in making payments to both a HELOC and your hard money loan at the same time.

Personal line of credit

A personal line of credit, similar to a HELOC, might be a better idea if you don’t have a home to use as collateral. It’s still a revolving line of credit, but you might face higher interest charges compared to a HELOC since it’s an unsecured line. It also means your credit score and credit history are more heavily scrutinized to see if you’re worthy of lending money to.

401(k) financing

You can use your retirement savings as a down payment in a few different ways. You can take out a 401(k) loan—if your plan allows it—and make payments according to the terms your 401(k) provider sets. You could also use a distribution from your 401(k) if you’re using it as a first-time homebuyer, which may help you avoid tax penalties (check with your tax advisor). Generally, though, you should skip taking money from your future self, because there’s no way to make up for the money you’ve earned due to contribution limits. Even if the amount you’re borrowing isn’t that much.

Business loan or line of credit

For house-flippers that do this full-time rather than on the side, you might have a full-fledged business to run. If you need a down payment for your hard money loan, look into a small business loans or lines of credit. Business lines of credit, like HELOCs and PLCs, allow you to borrow only what you need. In this case, just enough for a down payment. As a company, you may qualify for this alternative funding method. 

When Should a Hard Money Loan Be Refinanced?

It usually takes at least three months to one year to refinance a hard money loan. You’ll have to wait until you finish construction to refinance a rental or commercial property hard money loan. Additionally, your finances must be in place before you may be able to qualify for another type of mortgage. If your credit score or payment history isn’t great, you may have to wait until you build those up to refinance. You’ll also want to work with a refinance lender after you confirm that you have enough equity in the property to pay off the hard money loan. 

Lenders That Refinance Hard Money Loans

While there are lenders that are willing to refinance hard money loans, it will likely be more complicated than refinancing a conventional mortgage. You’ll probably refinance into one of the following:

• Traditional bank loan
• Federally backed loan
• Long-term rental loan

Lenders may require you to wait up to one year before they’ll do an appraisal on the after repair value of a home, so it may be tricky to refinance a hard money loan immediately. Make sure you understand whether or not you’ll pay a fee for prepaying your hard money loan and how much it is before going forward with refinancing — and ideally avoid prepayment penalties in the first place.

Should You Get a Hard Money Loan?

Before you jump to an application, make sure getting one is the right decision.

• Is it for flipping a house? Short-term financing, like flipping a house or updating a rental property, would be a good time to look into hard money loans. If you’re looking to buy a home to live in, consider a conventional, FHA, or another type of traditional mortgage. 
• Have you flipped homes before? If this is your first time house-flipping, you might not qualify for a hard money loan. This type of financing is better for someone who’s done this before, rather than someone who’s going into it cold.
• Do you have any cash for additional financing? Whether it’s for a down payment or covering what a hard money loan won’t, you’ll need to have funding from an alternative source for other things. Otherwise, you might have to resort to taking out an additional loan. If your property doesn’t sell right away, you might be on the hook for more money than you had originally planned. Having money for a down payment, or whatever a hard money loan won’t cover, might be the determining factor between getting approved and denied for a hard money loan.
• Do you need 100% financing? Hard money loans may be an answer if you are trying to buy an investment property. (If you are buying a single-family residential property to live in, other options like FHA or VA loans may offer a low down payment with lower rates.)

Before applying, Nav can help you see instant business financing options that are tailored to your business. You’ll be able to browse the small business loans you’re most likely to qualify for in real-time, as well as access tools to help with cash flow and more.