Taking out a hard money mortgage can be a confusing process. Most banks do not offer hard money lending services. Instead, you’ll need to visit a mortgage broker or wholesale lending firm specializing in hard money. They can help you take out a high interest hard money mortgage without meeting general lending qualifications such as a credit check, income verification, or debt-to-income analysis.

Here’s the step-by-step process of receiving a hard money mortgage:

Step 1 – Consider Hard Money Alternatives

Hard money mortgages let you bypass many traditional lending requirements. However, they tend to have very high interest rates. Hard money borrowers regularly pay 12% interest or more for the luxury of having few qualifications. Before seeking out a hard money mortgage broker, consider the alternatives available to you. Talking to a regular bank can help you understand your options. Even if you have a low credit score, are self-employed, or have an unstable income, you may be able to take out a more traditional loan with a lower interest rate. The Federal Housing Administration (FHA) offers mortgage programs to borrowers in challenging situations and many communities and credit unions offer services designed to help prospective homeowners.

Step 2 – Meet Hard Money Qualifications (Bring Cash)

You don’t need to meet many requirements to take out a hard money mortgage. But, you do need to have cash on hand. Investors are willing to take the risk of lending to you without checking your qualifications because you are willing to put your own money into the property.

In today’s market, taking out a hard money mortgage for the purchase of a home you intend to live in (owner occupied) generally has a 65% loan-to-value rule. A hard money lender will give you up to 65% of the money needed to buy the property. You will need to come up with the other 35% as a down payment. In some cases, you may be able to get seller financing for 15% of the loan and put only 20% down.

Hard money lenders don’t care where the down payment money is coming from (it can be a gift from your relatives or a cash advance from your credit card). But, if you don’t have the cash, you cannot get a hard money loan.

Step 3 – Find a Hard Money Mortgage Broker or Firm

Most mortgage brokers do not have the knowledge or connections necessary to make hard money loans. You need to find someone with experience and investor relationships. Try searching through our directory of hard money mortgage brokers to find a professional in your area. If you have friends or relatives with hard money loans, ask them for recommendations.

Step 4 – Apply to Hard Money Lenders

Your hard money mortgage broker will help you complete the necessary paperwork and apply to investors / lenders. He can help you get a property appraisal, set up an escrow account, and prepare for closing. If you apply directly to hard money lenders, you may have to re-do some of the work each time your loan is denied. (For example, many lenders have their own preferred appraisal companies).  

Step 5 – Close the Loan

After your hard money mortgage is approved, you will sign the note and deed at a traditional loan closing. Your paperwork will detail where and when to send your monthly payments.

Step 6 – Refinance or Sell

Hard money mortgages aren’t meant to be forever. Your loan will probably have a term between three and fifteen years. But, because you’re paying such a high interest rate, you’ll probably want to get out early. Spend the next few years fixing your credit and preparing to qualify for a traditional refinance at a more reasonable rate.