Hard Money Lending: What Will Your Lender Require?

Hard money loans are a great solution when you’re looking for a quick financing to close on a real estate investment. Easier and faster to obtain than conventional financing  – which can take up to 3-4 months – hard money lenders can close a real estate transaction in as few as 10 days. To make the process as simple and quick as possible, it’s important to have all of the necessary documentation required by your lender. Continue reading for a breakdown of what most hard money lenders will require before approving a loan request.

What do You Need to qualify for a hard money loan?

Applying for a residential hard money loan requires less paperwork and documentation than applying for a traditional mortgage, making the process faster and simpler. Most lenders will ask for similar documentation, but each lender may also have specific requirements depending on the company or the financed property. We’ve listed out the most common required documentation below.

[ Seeking a hard money construction loan? The required documentation will be more extensive than a residential property. Reach out to your lender about additional documentation and requirements. ]

Most Common Documentation Required for a Hard Money Loan

Photos of the Property

Exterior and interior photos and/or video of the property are required. This includes photos of any areas or specific items on the property that will be renovated or replaced. This documentation helps the lender visualize the property and understand your renovation plans, which is key to a successful loan process. 

Repair Estimates

Various tools surrounding a model house stacked on a pile of coins.

Any repairs or replacements planned for the property require written estimates from a licensed contractor. If you’re planning some DIY projects, it’s recommended to get a third party estimate for that work to include in your loan package. Make sure that the estimates are detailed and clearly outline the scope of work to be completed.

Contract to Purchase

Include a copy of the signed contract that has been agreed to by all parties. If the official contract isn’t yet ratified, still include the contract that will be completed. Outline all of the terms and conditions, as well as any important title company or escrow instructions.

Insurance Quote

Contact your insurance company to obtain a quote for the property and include it in your documentation.

Prelim Title Report

If possible, provide documentation or a “preliminary” title report showing that the title is clean for the subject property. Your hard money lender will work with their own title companies to confirm this before closing the loan, but documentation proving there are no title issues will help quicken the approval process.

In addition to the common documentation requirements that we’ve just covered, each hard money lender may have other requirements. This could include extra personal or property documentation. Regardless of what is required, delivering all documentation in a timely manner is critical for loan approval.

What is the LTV on Hard Money Loans?

The number 75 with a percentage sign.

How much you can borrow with a hard money loan depends on several factors. Generally, hard money lenders will lend 65-75% of the current appraised value of the property – this is referred to as the LTV (loan to value) ratio. Some lenders will base the loan on the property’s ARV (after repairs value), which means the lender estimates the value of the property upon completion of the renovation.

Most hard money lenders want to make sure that you have substantial equity in the property before approving a loan, which usually amounts between 30-40%. If the funds are coming from different sources, that could impact the approval process.

Lenders are also likely to ask to be listed as the “first lien” on the property, which means the lender’s loan will take precedence over any other debt on the property. In the event of default or foreclosure, the hard money lender would be repaid first with proceeds from the sale of the property.

Learning the basics of what is required to obtain a hard money loan will help make the process easier and faster, so you don’t have to risk losing out on your next real estate investment opportunity.

Hard Money Lenders in Texas and Tennessee

A hard money loan can be a great fit for your next real estate project. If you’re looking for a hard money loan in Texas and Tennessee, connect with the team at Loan Ranger Capital. Contact us or apply online today and our team of dedicated professionals will help you get started.

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