What Is a Hard Money Loan?
Bottom Line
A hard money loan is a short-term, asset-based loan secured by real estate. The lender underwrites the property, not your income. If the deal makes sense and you have equity or a down payment, you can close within 13 days.
The term "hard money" refers to the hard asset (the property) that backs the loan. Unlike banks, which focus on your income, employment history, and debt-to-income ratio, hard money lenders focus on the property's value, the loan-to-value ratio, and the borrower's exit strategy.
Hard money lending has been around for decades, but the market grew significantly after 2008 when banks tightened conventional lending standards. Today, hard money and private lending account for a significant share of investment property transactions, particularly in competitive markets where speed matters. (National Private Lenders Association)
Insource Funding has been a direct private lender since 2001, closing over 6,000 loans and financing more than $1 billion in investment property loans across 43 states + DC.
How Hard Money Loans Work
The process is simpler than conventional lending. Here is the typical timeline:
Compare this to conventional lending, which takes 30-45 days and requires tax returns, bank statements, employment verification, and debt-to-income ratio calculations. For investors competing against cash offers, that 30-day gap can mean losing the deal.
Hard Money Loan Rates and Terms in 2026
Hard money loans are short-term bridge financing for investment property purchases. Here are the current terms:
| Detail | Terms |
|---|---|
| Rate range | 7%-10% |
| Loan term | 12-24 months |
| Max LTV | 75% |
| Max CLTV (with seller second) | 90% |
| Property types | 1-4 unit residential investment properties |
| Credit score minimum | None |
| Closing timeline | Within 13 days |
| Minimum prepayment | 12 months |
90% CLTV with Seller Second
Need to reduce your out-of-pocket? We allow a seller-held second position, bringing your combined loan-to-value up to 90% CLTV. The seller carries part of the balance, so you bring 10% instead of 25%. This is one of the most effective ways to scale faster while conserving capital.
Looking for long-term financing, commercial loans, or cash-out refinance options? See our full loan programs, including 30-year rental loans and commercial property loans.
Who Uses Hard Money Loans
The stereotype is that hard money is a "last resort" for borrowers who cannot get bank financing. That has not been accurate for years. Today's hard money borrowers are typically:
- Portfolio investors (5-50+ properties) who have exceeded Fannie Mae limits and need a path past 10 properties
- Self-employed investors whose tax returns show low income due to depreciation, write-offs, and entity structures
- Time-sensitive buyers who need to close within 13 days to compete with cash offers
- Foreign national investors who cannot qualify for conventional U.S. loans. Foreign national loan programs
- LLC buyers who want to close in an entity name for liability protection
Hard Money vs Bank Loans
| Factor | Hard Money / Private | Bank / Conventional |
|---|---|---|
| Closing speed | Within 13 days | 30-45 days |
| Income docs | None | Tax returns, W-2s, bank statements |
| Property count limit | Unlimited | 10 (Fannie Mae) |
| Entity closing | Yes | No |
| Approval basis | Property value and equity | Borrower income and DTI |
| Rates (2026) | 7%-10% | 6.5%-7.5% |
| Credit score minimum | None | 620-680+ |
| Certainty of close | High | Moderate (underwriting delays common) |
The rate difference is real, but it narrows when you factor in opportunity cost. An investor who closes within 13 days locks up a property that 10 other buyers are bidding on. An investor who waits 45 days for a bank loan at a lower rate risks losing the deal entirely.
How to Qualify for a Hard Money Loan
Hard money qualification is property-first. Here is what lenders evaluate:
- LTV (Loan-to-Value). The single most important factor. Lower LTV = lower risk for the lender = better rate for you. Max 75% LTV.
- 90% CLTV with seller second. We allow a seller-held second position up to 90% CLTV. This lets you bring 10% instead of 25% while keeping the first position at 75% LTV.
- Property type. Single-family, 2-4 units, multifamily (5+), mixed-use, and commercial. Some property types have specific LTV caps.
- Location. We lend in 43 states + DC. Properties in major metros and high-demand suburbs get the best terms. We do not lend in AK, AZ, MN, ND, NV, SD, or VT.
- Exit strategy. For short-term bridge loans, lenders want to know how you plan to pay off the loan. Typical exits: sell the property, refinance into a 30-year loan, or lease up and refinance. See how the approval process works.
We do not have a minimum credit score requirement. Qualification is based on the property's value, your equity position, and the deal structure.
Common Use Cases
Purchase with speed
Seller accepted your offer with a 14-day close. A bank cannot get it done. A hard money lender can. This is the most common use case.
Cash-out refinance
You own a property free and clear or with significant equity. You want to pull cash out to buy more properties without selling.
Bridge to long-term
Buy with a bridge loan, lease up the property, then refinance into a 30-year rental loan once the property is performing.
Seller second for lower down payment
Negotiate a seller-held second to reach 90% CLTV. You bring 10% instead of 25%. We allow this structure on purchases where the seller agrees to carry a portion.
5 Mistakes Investors Make with Hard Money
- Not accounting for origination fees in your underwriting. Most hard money loans charge 1-3 points at closing. If you are buying at 75% LTV and paying 2 points, your effective basis is already above 75%. Include all loan costs in your deal analysis.
- Ignoring the prepayment penalty. Minimum prepayment period is 12 months. If you plan to refinance sooner, factor the prepay cost into your deal analysis before you close.
- No exit strategy. A 12-month bridge loan with no plan for what happens at month 12 is a problem. Know whether you are selling, refinancing, or extending before you close.
- Comparing rates without comparing certainty. A bank quote at 6.5% means nothing if the loan falls through at underwriting. Hard money at 9% with a guaranteed close is a better deal if the alternative is losing the property.
- Not shopping multiple lenders. Hard money rates and terms vary significantly. Get at least 2-3 term sheets before committing. Get a term sheet from Insource Funding.
Frequently Asked Questions
What is the typical interest rate on a hard money loan in 2026?
Hard money bridge loan rates range from 7% to 10%. Terms are 12-24 months with a maximum 75% LTV. No minimum credit score required.
How fast can a hard money loan close?
Insource Funding closes within 13 days. Appraisals come back within 7 days. Once appraisal and title are clear, closing is scheduled immediately.
Do hard money lenders check credit?
Insource Funding does not have a minimum credit score requirement. We pull credit as part of the process, but qualification is based on the property's value and your equity position, not your credit score.
Can I get a hard money loan for a rental property?
Yes. Many investors use a bridge loan for purchase and then refinance into a 30-year rental loan once the property is leased. Insource Funding offers both short-term bridge loans and 30-year rental loans.
What is the maximum LTV for a hard money loan?
75% LTV on hard money bridge loans. We also allow a seller-held second position up to 90% CLTV on purchases, so you can bring as little as 10% down when the seller agrees to carry a portion.
What is CLTV with a seller second?
CLTV (combined loan-to-value) includes both the first position loan and any secondary financing. We allow up to 90% CLTV when the seller holds a second position. Our first lien stays at 75% LTV, and the seller carries the remaining 15%.
Are hard money loans only for experienced investors?
No. First-time investors can qualify. We focus on the deal, the property, and the exit strategy rather than the number of deals you have closed.
What is the minimum prepayment period?
12 months on all loan types. If you pay off the loan before 12 months, a prepayment penalty applies. Factor this into your deal analysis.
Do I need a down payment for a hard money loan?
Yes. Standard down payment is 25% (75% LTV). With a seller-held second, you can bring as little as 10% down (90% CLTV). True no-money-down hard money loans are rare.
Where does Insource Funding lend?
We lend in 43 states + DC. We do not lend in Alaska, Arizona, Minnesota, Nevada, North Dakota, South Dakota, or Vermont.
Talk to a direct lender, not a broker.
Term sheets in 1 hour. Close within 13 days. No middlemen.