Hard Money Lending FAQs: 20 Questions Real Estate Investors Always Ask
These are the 20 most common questions real estate investors ask about hard money lending — answered directly and completely. Whether you’re doing your first fix and flip or scaling a portfolio, these answers cover what you need to know.
General Hard Money Questions
1. What is a hard money loan?
A hard money loan is a short-term, asset-based loan from a private lender, secured by real property. Unlike bank loans, hard money lenders evaluate the deal — property value, rehab budget, and exit strategy — rather than the borrower’s income or credit score. Hard money loans close in 5-14 days and are used primarily for fix & flip, bridge, construction, and investment property purchases.
2. How are hard money loans different from bank loans?
Bank loans take 30-60+ days to close and require full income documentation, strong credit history, and properties in good condition. Hard money loans close in 5-14 days, use asset-based underwriting, and fund distressed or investment properties that banks won’t touch. For fix & flip investing, hard money is almost always the better tool.
3. What credit score do I need for a hard money loan?
Most hard money lenders require a minimum credit score of 620. Ambition Lending considers borrowers with 620+ credit. However, deal quality matters more than credit score. A strong property with solid ARV, realistic rehab budget, and clear exit strategy can compensate for a below-average credit profile.
4. Can first-time real estate investors get hard money loans?
Yes. Hard money lenders regularly fund first-time investors. Approval is based primarily on the deal’s merits, not experience level. Ambition Lending works with first-time fix & flip investors nationwide. The key is submitting a complete, well-documented deal — property address, rehab budget, comps, and exit strategy.
5. What documents do I need to apply for a hard money loan?
The typical hard money loan application requires: government-issued ID, property purchase contract (or LOI), estimated rehab budget, 2-3 comparable sold properties, entity documents (if using LLC), proof of insurance commitment, and a brief description of your exit strategy. No tax returns or income documentation are typically required.
Rates and Fees
6. What are typical hard money loan interest rates?
Hard money loan rates typically range from 9.5% to 12.5% depending on the lender, loan-to-value ratio, borrower experience, and loan term. Ambition Lending’s rates fall within this range and are disclosed upfront in your term sheet. Rates vary by deal — submit your deal for a specific quote.
7. What are origination points on a hard money loan?
Origination points (also called “points”) are an upfront fee charged by the lender, expressed as a percentage of the loan amount. One point equals 1% of the loan. Most hard money lenders charge 1.5-3 points. On a $300,000 loan at 2 points, the origination fee is $6,000, typically paid at closing.
8. Are there prepayment penalties on hard money loans?
Some hard money lenders charge prepayment penalties if you pay off the loan early — often a minimum of 3-6 months of interest. Ambition Lending’s terms vary by deal. Always ask about prepayment terms before signing. If you’re planning a fast flip (under 3 months), understand the minimum interest clause in your loan agreement.
Loan Structure
9. What is LTC in hard money lending?
LTC stands for Loan-to-Cost — the ratio of the loan amount to the total cost of the project (purchase price + rehab budget). A 90% LTC loan on a $200,000 purchase with $50,000 in rehab costs ($250,000 total) would be a $225,000 loan. Ambition Lending offers up to 90% LTC on qualified deals.
10. What is ARV and how does it affect my loan?
ARV (After-Repair Value) is the estimated market value of the property after renovations. Hard money lenders typically cap loans at 65-75% of ARV to ensure equity protection. If your property has an ARV of $350,000, Ambition Lending may lend up to $262,500 (75% of ARV). ARV is determined by comparable sold properties in the area.
11. How do hard money rehab draws work?
Rehab draws are disbursements of renovation funds released as work is completed and inspected. Typically, an inspector visits the property, verifies completed work, and authorizes a draw. Ambition Lending releases draws within 24 hours of inspection approval. Draw schedules are outlined in the loan agreement before closing — no surprises.
12. Can I use a hard money loan on an LLC?
Yes. Most hard money lenders, including Ambition Lending, lend to LLCs, corporations, and other business entities as well as individuals. Using an LLC provides liability protection and is common practice among real estate investors. Have your LLC certificate, operating agreement, and EIN ready when applying.
Loan Types
13. What types of properties qualify for hard money loans?
Hard money lenders fund: single-family residential (SFR), 2-4 unit properties, condos, townhomes, multifamily, light commercial, and vacant land (in some cases). The property must be an investment — not a primary residence. Ambition Lending funds fix & flip, bridge, DSCR, and construction loans across all major property types.
14. What is a DSCR loan and how is it different from hard money?
A DSCR loan (Debt Service Coverage Ratio) is a long-term rental property loan that qualifies based on the property’s rental income, not the borrower’s personal income. Hard money is short-term (6-24 months) for acquisition and rehab. DSCR is typically used to refinance into permanent financing after the property is stabilized. Many investors use hard money to close and renovate, then refinance to DSCR.
15. Can I use a hard money loan for new construction?
Yes. Hard money construction loans fund ground-up development — from land acquisition through vertical construction. Funds are released on a draw schedule tied to construction milestones. Ambition Lending provides construction loans for experienced builders and developers in major markets nationwide.
Process and Timeline
16. How fast can I get approved for a hard money loan?
Ambition Lending issues term sheets within 24 hours of a complete deal submission. Approval is fast because we evaluate the deal — not your employment history or tax returns. A complete submission (property address, purchase price, rehab budget, ARV comps, ID) gets you a term sheet same-day or next-day.
17. What is a Proof of Funds (POF) letter?
A Proof of Funds (POF) letter confirms to a seller or listing agent that a buyer has financing available to close. Ambition Lending issues POF letters within 48 hours of loan approval. POF letters are critical in competitive markets where sellers want confidence that a buyer can actually close before accepting an offer.
18. Does Ambition Lending lend in my state?
Ambition Lending lends nationwide across major investment markets including California, Texas, Florida, Arizona, Maryland, Colorado, Georgia, Nevada, Tennessee, North Carolina, and many more. Submit your deal and we’ll confirm coverage in your specific market.
19. What happens if my project takes longer than the loan term?
Hard money loans can typically be extended (for a fee) if your project runs long. Most lenders charge an extension fee of 1-2 points per 3-6 month extension. It’s important to discuss extension terms before signing. Budget your timeline conservatively — assume your rehab takes 30% longer than your contractor estimates.
20. How do I get started with Ambition Lending?
Submit your deal at ambitionlending.co. Provide: property address, purchase price, rehab budget, estimated ARV with 2-3 comps, your ID, and a brief exit strategy description. You’ll receive a term sheet within 24 hours. No application fee. No commitment required until you sign the term sheet.
Frequently Asked Questions
What is the minimum loan amount at Ambition Lending?
Ambition Lending funds hard money loans starting at $75,000. Our loan range is $75,000 to $3,000,000 depending on property type and market.
Does Ambition Lending lend to foreign nationals?
Ambition Lending considers foreign national borrowers on a case-by-case basis. Contact us to discuss your specific situation and deal.
How is interest calculated on a hard money loan?
Hard money loan interest is typically calculated on the outstanding balance monthly. Some lenders charge interest on the full loan amount even if rehab funds haven’t been drawn yet. Ask your lender specifically how interest accrues on undisbursed rehab funds.
Can I get a hard money loan for a rental property?
Yes. Ambition Lending provides bridge loans and DSCR loans for stabilized rental properties, and hard money loans for properties being renovated before rental. If the property is already rented and cash-flowing, a DSCR loan may be more appropriate than hard money.
What is the difference between a hard money loan and a private money loan?
The terms are often used interchangeably. Private money loans come from individual investors rather than institutional lenders. Hard money typically refers to private lenders who follow structured underwriting criteria. Both are asset-based, short-term, and faster than bank loans. Ambition Lending is a direct private lender offering hard money and bridge loans nationwide.
