5 Most Frequently Asked Questions About Hard Money Loans


A hard money loan is a short-term loan that is secured by property rather than creditworthiness. In this case, the property is real estate. These loans are typically funded by private investors rather than banks or credit unions and need to be paid back within 12 months.

These short-term loans are beneficial in many cases because of their streamlined approach. Compared to a traditional loan, a hard money loan has fewer borrower qualifications, an easier application process and faster approvals and closings.

Here are five of the most frequently asked questions about hard money loans and their answers. Of course, if you have additional concerns, don’t hesitate to call a hard money lender such as First Equity Funding.

  1. What is the process for a hard money loan like?  

Hard money loans provide investors with the quick capital that is needed to purchase investment properties. Once the documents are received from the Title Company, you can usually get the funds within 72 hours. All loans require the Title, insurance and an appraisal.

  1. How long can I take the loan out for?

Typically, hard money loans are a term of 3 to 12 months, depending on your needs. In some cases, they can be extended, but this will result in increased costs or a higher interest rate.

  1. What are the interest rates?

Interest rates vary among lenders, which is why it’s a good idea to get several quotes. You can expect an interest rate from 10% interest-only to 18% interest-only, but some lenders will defer the interest. This is an attractive offer for investors that don’t want to make payments during the remodel process.

  1. Can the money be used to make repairs?

Yes. Most lenders will ask that you provide documentation of all completed repairs made on the home, as well as invoices from contractors and subcontractors. A “Draw Request” form will be filled out, and once the work is inspected, the draws can be dispersed.

  1. Will my credit make a difference?

In some cases, yes. Since the loan is backed by real estate, lenders look more closely at the value of the property. That said, some lenders do run credit checks to look for past bankruptcies, foreclosures, charge offs and collections.

First Equity Funding is an asset-based real estate lender that can help you buy, fix and sell residential and commercial properties in the NY, NJ and Pennsylvania area. Discover how you can be more competitive with our borrower-friendly programs by giving us a call today.