Hard Money Loan Requirements: The Underwriting File, Item by Item
Hard money underwrites faster than conventional because it verifies fewer things — not because it verifies nothing.
What it does check, it checks carefully. And one requirement that never appears in marketing material fails more files than credit and experience combined.
Programs: Fix and flip and hard money · How hard money works
What matters, in order
1. The property
The primary collateral and the primary underwriting object.
- Non-owner-occupied. These are business-purpose loans. Owner occupancy disqualifies the file entirely, and misrepresenting it is fraud.
- Property type. 1-4 unit residential is standard. Many lenders extend to small multifamily, mixed-use and land with construction. Rural and unusual properties are harder.
- Condition. Nearly anything is acceptable — that is the product. Severe structural or environmental issues can still stop a file.
- Marketability. The lender is asking whether this sells if they have to sell it. A property with functional obsolescence, an unusual layout or a bad location is harder regardless of the numbers.
2. The ARV and the comps
The ceiling on your loan.
The appraiser values the finished property against comparable sales. You want at least two or three genuine comps within roughly half a mile and six months, similar in size, age and configuration.
Thin comp markets — rural areas, unique properties, neighborhoods with little turnover — produce conservative ARVs and sometimes make a deal unfundable. How ARV is determined.
3. Liquidity — the requirement that fails most files
This is the one.
Lenders verify you have cash for four things, and investors typically budget for one:
| Requirement | Typical |
|---|---|
| Down payment | 10-20% of purchase |
| Closing costs and points | 3-5% of loan |
| Draw float | Enough to front each phase before reimbursement |
| Carry reserve | Several months of interest, taxes, insurance |
The draw float is the invisible one. Rehab money is reimbursed after verified completion, so between paying a contractor and receiving funds there is a 3-10 day gap. Across a multi-phase rehab you need real working capital that has nothing to do with your down payment.
Some lenders require documented liquidity equal to a set number of months of carry, or a percentage of the rehab budget, held after closing. An investor bringing exactly enough to close does not clear it.
Budget the down payment, the closing costs, the float, and a contingency. Then add carry. Files fail here more than anywhere else.
4. The scope of work
A line-item budget: room by room, trade by trade, with quantities and costs.
Why it matters beyond approval: the scope becomes your draw schedule. Vague scopes produce vague milestones and disputes about whether a phase is complete.
Include a contingency line of 10-20%. A budget without one signals inexperience and is usually wrong.
5. Experience
Changes leverage materially.
| Tier | Purchase LTC | ARV cap |
|---|---|---|
| First project | 80-85% | 65-70% |
| 2-4 completed | 85-90% | 70% |
| 5+ completed | 90% | 70-75% |
Document prior projects with HUD-1 or closing statements showing purchase and sale. Before-and-after photos help. Vague claims of experience do not move the tier. First-timer specifics.
6. Credit
Lighter than conventional, but checked.
- 620-660 is a common floor; some programs go lower with more equity
- Used mainly as a screen for fraud patterns, recent defaults and current mortgage lates
- Recent foreclosures, bankruptcies or current defaults are the real problem, more than the score
7. The exit
Documented and plausible.
Sale — supported by comps and a realistic timeline. Refinance — this is where investors get caught. The takeout lender's seasoning and lease requirements must line up with your hard money maturity. Confirm both before closing. The handoff. Other payoff — a pending sale elsewhere or a capital event, documented.
8. The entity
Business-purpose loans, so entity vesting is standard and often required.
LLC, LP or corporation. You will sign a personal guarantee. Entity mechanics.
The document list
Assemble this before you apply. Files that arrive complete close in 7-14 days; files assembled during underwriting take three to four weeks.
Property
- Executed purchase contract with all addenda
- Line-item scope of work with contingency
- Photos, interior and exterior
- Comparable sales supporting your ARV
- Title commitment or preliminary report
Borrower
- Government ID
- Credit authorization
- 2-3 months of bank and brokerage statements
- Schedule of real estate owned
- Track record: closing statements from prior projects
Entity
- Certificate of Formation or Articles of Organization
- Operating Agreement, signed
- EIN letter
- Certificate of Good Standing, pulled recently
- Borrowing resolution
Insurance
- Builder's risk or vacant dwelling policy, bound before closing
- Lender named as mortgagee
- Flood policy if in a mapped zone
Contractor
- License and general liability insurance
- Signed contract matching your scope
- W-9
Start the insurance early. Builder's risk is not a standard landlord policy, it costs more, and it is one of the most common causes of a delayed closing.
What gets files declined
In rough order:
- Insufficient liquidity. Covered above.
- ARV not supported. Comps do not justify the number.
- No credible exit. Especially a refinance whose seasoning does not fit the term.
- Thin margin. The lender sees a deal that cannot absorb an overrun.
- Scope too vague. Signals the project is not planned.
- Property unmarketable. Location, obsolescence, environmental.
- Recent derogatory credit. Active default or very recent foreclosure.
- Contractor problems. Unlicensed, uninsured, or no contract.
How the timeline actually runs
A complete file moves faster than investors expect, and an incomplete one moves slower than lenders promise.
| Day | What happens |
|---|---|
| 0 | Application and scope submitted |
| 1-2 | Term sheet issued, appraisal ordered |
| 3-7 | Appraisal completed, title commitment received |
| 5-9 | Underwriting review, conditions issued |
| 8-12 | Conditions cleared, insurance bound |
| 10-14 | Docs drawn, closing scheduled, funding |
What compresses it: documents ready before application, entity already formed and in good standing, insurance agent lined up, a scope that needs no revision, and a property with easy appraisal access.
What extends it: appraisal scheduling delays in busy markets, a Certificate of Good Standing that expired, an insurance policy written as the wrong product, a contractor without current insurance, and title issues — liens from prior contractors are common on recently renovated properties.
The single biggest controllable factor is appraisal access. If the property is occupied, tenant-occupied, or requires coordination with a listing agent who is slow to respond, the whole timeline waits. Arrange access at the same time you submit the application, not when the appraiser calls.
More on what drives closing speed.
Frequently asked questions
What credit score do I need for a hard money loan? Commonly 620-660 as a floor, and some programs go lower with more equity. Recent defaults matter more than the score.
Do hard money lenders check income? Generally not. They verify liquidity — that you can fund the down payment, closing, draw float and carry — rather than income or DTI.
What is the biggest reason files get declined? Insufficient liquidity, specifically the working capital to float draws and carry the project. It is the requirement least visible in marketing material.
Do I need experience? No, but it changes your leverage. First-timers typically see 80-85% LTC against 90% for experienced investors.
Do I need an LLC? Usually yes. These are business-purpose loans and entity vesting is standard. You will personally guarantee it.
How long does approval take? 7-14 days with a complete file. Three to four weeks if documents are assembled during underwriting.
Do I need a licensed contractor? Most lenders require one for permitted work, with license and insurance on file. Self-performing is sometimes allowed with reduced rehab leverage.
Next steps
Build the liquidity picture honestly before you apply — down payment, closing, float, contingency and carry. That single number decides most files.
Have a deal you want looked at?
Send the property and the numbers — we shop it across lender programs and tell you honestly whether it works.
Talk To A Loan OfficerRelated Reading
Educational content, not a commitment to lend or an offer of credit. DSCR and fix-and-flip loans are business-purpose loans secured by non-owner-occupied property. Program parameters vary by lender and change over time. Figures are illustrative.