If you need fast financing for your real estate project, a hard money loan may be your best bet. While these loans have many benefits, you must first understand how they work. Below are the essential hard money loan requirements you need to meet to successfully finance your project.

NOTE: If you’re looking for a reliable hard money lender check out our Hard Money Lenders Directory.

Requirement #1: Come Prepared

If you want to get a hard money loan approval, it’s important for you to come fully prepared. You need to convince the lender that you have a solid business plan for your real estate project.

Here are the hard money loan requirements you must provide at the application stage:

  • The property location, type and neighborhood features
  • Current condition of the property — including everything from the roof to the foundation
  • Clear pictures of the property from all angles
  • Your project plan and timeline
  • Detailed cost estimates for all required materials and work
  • Any permits needed and how they will be obtained
  • Any liens on the property you’re aware of
  • The contractor(s) you intend to use on the project, their experience on similar projects and their contact information
  • Current market value and expected after repair value (ARV)
  • Your downpayment amount
  • The collateral you will put up to obtain financing

Without a clear plan of action a hard money lender will not understand what he or she is being asked to finance. Lack of information creates too much risk and you may not get approved.

Requirement #2: Reputation (Yours and the Lender’s)

The second essential hard money loan requirement is having a good reputation. This goes both ways — both yours and the lender’s reputation are vital to loan approvals and successful projects.

You need to show a hard money lender you can successfully complete a project. If your past experience, scope of work, and budget are adequate, you are likely to develop a mutually beneficial, long-term relationship with your lender.

With hard money lenders your past credit issues may not be an issue.

Taryn Kendrick, president and co-owner of Kansas City-based Worcester Financial, says that they “will work with individuals who have had past credit issues,” but are working to resolve them.

This is the same from the borrower’s point of view. You, as a borrower, want to partner with a hard money lender who is invested in your success.

If the hard money lender is reliable, timely, helpful and provides coaching and advice to help you succeed, then this will result in a positive relationship.

You should look for lenders who offer their industry knowledge in addition to the loan before you commit to a project.

You should avoid a bad lender who does not care if your project succeeds (although rare, there are some predatory lenders out there). The best way to avoid this is to get referrals from other real estate investors and flippers who have successful long term relationships with their lender.

Requirement #3: Speed and Simplicity  

Another essential hard money loan requirement is that the loan approval process should be relatively quick and easy.

The purpose of a hard money loan is to quickly finance a rehab project or real estate flip. Speed is essential when trying to close a deal and get your project started right away.

Since most hard money financed projects work on fast timelines, like a fix-and-flip, you do not want the lender to over-complicate things. You also can’t afford to wait a long time to access your funds. You want to dodge the hurdles inherent in traditional mortgage loans. So you’re looking for a hard money lender that operates quickly and simply.

Hard money loans will not fit the needs of every real estate investor. But if you need cash fast to secure investment deals, partnering with a hard money lender who aligns with your goals can lead to a successful and profitable project. Meeting these essential hard money loan requirements is a surefire way to get you started in the right direction.

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