Do Hard Money Loans Require a Down Payment?

Nov 30, 2021 | Blog

If you’re new to hard money lending, you may have a lot of questions about the process and how it differs from conventional lending. Fortunately, the process is much simpler, and the similarities to a traditional loan process are minimal. For example, a down payment may be required for a hard money loan — but the terms will suit your unique scenario. Let’s dig into the requirements for hard money loans, including what exactly a hard money loan is, the hard money loan down payment and how to find an experienced hard money lender.

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What are the requirements for a hard money loan?

To understand the requirements for a hard money loan, let’s first distinguish the difference between hard money lenders and traditional lenders.

Who is a hard money lender?

Hard money lenders are individuals or investment groups with access to personal and private funds, while conventional lenders tend to be banks or other financial institutions.

Conventional lenders are required to follow the rules and regulations dictated by Congress-created companies Fannie Mae and Freddie Mac. This means borrowers usually have a long list of strict requirements to prove they can pay back a loan.

Hard money lenders, on the other hand, are not driven by the same rules. They have their own requirements for borrowers based on common sense, the overall merits of the deal, and their own knowledge and experience.


Who should get a hard money loan?

The greatest benefits to hard money loans are the speed and flexibility.

These types of loans are ideal for those in unique situations, who may not get approved by a traditional lender, or who can’t afford to wait for that process to be completed.

These types of borrowers include:

  • House flippers
  • Self-employed borrowers
  • Business owners
  • Real estate investors and investment properties
  • Those with large amounts of home equity
  • Those seeking a bridge loan or new construction loan


What do hard money lenders need from borrowers?

Hard money lenders don’t need much from borrowers compared to traditional lenders. Above all, they are interested in a relationship with borrowers so that trust, respect, and accountability is established.

Once this relationship is created, your hard money lender will want to hear about your unique loan scenario. In the form of an executive summary, they will need to know your plan and your exit strategy.

While your hard money lender may look at your credit score, this isn’t as essential as it is to traditional lenders. To a bank, a low credit score can be a deal-breaker. To a hard money lender, it’s just one piece of a bigger picture.


Do hard money loans require a down payment?

Many hard money lenders require some type of down payment, although it depends on your unique loan scenario, the property value, and your prior experience and relationship with the lender.

As with all other aspects of a hard money loan, down payments are not rigidly structured requirements. Instead, they can be as flexible as the loans themselves.

When you reach out to a hard money lender, explain your scenario. Provide the requested documentation, and the lender will quickly determine if a down payment is necessary and how much is required.

Whether a down payment is required for your hard money loan or not, reputable hard money lenders are going to try and keep the cost as reasonable as possible. The goal for a hard money lender is to create deals that are mutually beneficial and rooted in common sense.

What types of loans do hard money lenders offer?

The right hard money lender will offer a range of loan options for non-owner-occupied and owner-occupied consumer and business purposes alike.

For example, Avantgarde Lending offers the following loan options:

  • Single-family and multi-family
  • Commercial, industrial, land, and construction
  • Fix-and-flip or fix-and-occupy
  • Purchase money, rate-and-term refinance, and cash-out refinance

If you need financing for a scenario that banks have determined was too complex or impossible to do, ask your hard money lender to take a look.


How to find a reputable hard money lender

Hard money lenders aren’t created equally.

You will need to find a hard money lender that strives to be a leader not only in expertly structuring mortgage options for a wide variety of loan scenarios, but in having strong ethics.

In the hard money loan industry, Avantgarde Lending is the ethical standard. Avantgarde’s team of savvy real estate investors can quickly and simply evaluate your unique situation — no matter how complex.

We offer:

  • Same-day approvals
  • Funding in as fast as seven to 10 days
  • In-house underwriting, processing, and servicing
  • ​​Loan amounts from $50,000 to $20 million
  • Loan-to-Value up to 70% (deal specific)

Call us today if you want to learn more about how Avantgarde’s process works, or run your unique loan scenario by our team.

Now that you understand more about hard money loans and down payment options, you’re ready to get started with our team. If so, go ahead and submit your loan scenario for immediate review.

We look forward to working with you for many successful deals to come.

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