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Applying for a Hard Money Loan; What You Need to Consider

Hard money loans can be a bridge between the real estate market and your lending feasibility. When it comes to borrowing, banks have a much more stringent criteria for who receives a loan. Factors such as credit score, personal financial history, and down payment weigh heavily in the traditional loan deliberation process. In this regard, hard money lending offers an alternative for borrowers to consider.

With looser regulations and quicker turnaround on producing capital, hard money loans can be an effective bridging tool for real estate. However, even though hard money provides an alternative option, there are guidelines to consider before sending in an application. Here, we will run through some reasons people may not be able to secure a hard money loan, and what you might do to help.

Reasons People May Not Qualify for a Hard Money Loan

  • History of Foreclosure: One thing to consider in the hard money application process is your own real estate background. For most lenders, a borrower with a storied history of foreclosure will not be a desirable lending candidate. Developing solid renovation plans if flipping a home, or crafting a solid exit strategy can help in the case of past foreclosures.


  • Multiple Bankruptcy Filings: Another thing to consider is whether you have had multiple bankruptcy filings. When being considered for a hard money loan, lenders will check to see how the borrower has handled debt in the past. With multiple bankruptcy filings, private lenders will view it as high risk and often forgo the opportunity.

  • Very Low FICO Scores: While personal financial history is less of a factor in terms of hard money loans, lenders still look to see a borrower’s credit history. While lower FICO scores may pass in the lending field, very low scores tend to be flagged as this signals a red flag to potential investors.

  • Not Enough Equity: Equity is important when working in hard money lending, as this is classified as the physical property on the loan. Should the borrower fail to pay, equity is the insurance that the borrower provides in the case of foreclosure. Without any form of equity, the lending is too risky as there is no stake in the game for the borrower. Lenders like to see that the borrower also is placing risk into the investment.

  • No Exit Strategy: One of the most important things to consider when working within real estate, especially for fix and flip or home renovators is a tight exit strategy. When fixing and flipping to sell for a profit to pay off the debt, lenders want to see a well-thought-out plan that will ensure repayment. For home renovations, lenders want to know that proper plans and precautions are put in place for a streamlined renovation process.


If any of these match your criteria, it is a good idea to consider how these factors can change before applying for a hard money loan. In general, being able to show a positive personal financial history will lower interest rates and open up more lending options. Improving credit score by paying down debt, and showing intentional strategies for borrowing are ways to move towards a positive lending experience.

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