Simple Truth: What Are Hard Money Lenders and How They Help

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What Are Hard Money Lenders? A Simple Guide for Real Estate Investors and Borrowers

If you’ve been turned down by a bank or need fast funding to buy or fix a property, you’ve probably encountered the term hard money lenders. But what are they exactly? In this updated guide by Gustan Cho Associates, we’ll break it down in simple words so you know how hard money loans work, what to expect, and how to decide if they’re right for you.

What Are Hard Money Lenders?

Hard money lenders are private investors who focus on the value of a property when giving loans. They offer chances for loans even if your credit score or income is not ideal. They’re popular among real estate investors who need quick cash to buy, fix up, or build properties.

Unlike regular banks, hard money lenders care more about how much equity the property has and what the investor’s plan is for selling it.

For example, if you’re buying a fixer-upper and plan to flip it in 6 months, a hard money lender may fund the deal even if your credit isn’t perfect. That’s because they see the value in the property and your plan to sell it quickly.

Why Choose a Hard Money Lender Over a Bank?

When you want to get a loan from a bank, it can take a long time, sometimes weeks or even months. You also need to give a lot of paperwork. You might not get the loan if your credit score is not very good or your income doesn’t meet the bank’s requirements. This is where hard money lenders can help. They can close loans quickly, sometimes in just 7 to 14 days.

You won’t need to provide as many documents, and having a low credit score won’t stop you from getting the loan. Hard money lenders are especially good for people who want to invest in real estate. They let you move fast, which can help you compete with other buyers when the market is busy.

Who Uses Hard Money Loans?

Most people who use hard money lenders are:

• Real estate investors buying a property to fix and flip
• Landlords looking to buy rental properties fast
• Builders needing money for new construction
• Investors who can’t qualify with a bank

Hard money loans are for business or investment use only. They can’t be used for your personal home unless it’s a very special case. That’s because they’re considered commercial loans, not residential.

How Do Hard Money Loans Work?

Hard money loans are simple if you break them down. Here’s how it usually works:

1. You apply with a lender like Gustan Cho Associates
2. Lender checks the property’s value, not just your credit
3. You provide an exit strategy (how you’ll repay the loan)
4. Lender funds the loan, often within 2–3 weeks

The property is the primary collateral, and the loan amount is based on a percentage of the property’s value or purchase price, usually around 60% to 75% loan-to-value (LTV).

What Are the Loan Terms Like?

Hard money loan terms are different from regular loans:

Short-Term (usually 6–24 months)

Hard money loans are meant to be paid back quickly. They typically last between six months and two years. This short time makes them great for quick projects, like fixing and selling homes.

Interest-Only Payments

When you take a hard money loan, you often only pay the interest at first. This means your monthly payments are lower. You don’t have to worry about paying back the full loan until the end.

Higher interest rates (8% to 14% or more)

The cost of securing funds from hard money lenders is higher than that of a conventional bank. Interest rates can vary from 8% to 14% or even more. This higher expense is due to lenders taking on a higher level of risk with these loans.

Points or fees upfront (1–5% of the loan amount)

When securing a hard money loan, you might encounter several fees that need to be settled before you receive the funds. These fees, known as points, can vary from 1% to 5% of the total loan amount. This suggests that you should have some available cash when pursuing this form of financing.

The higher rates are because hard money lenders take more risk. But the speed and flexibility are worth it if you’re flipping a property quickly.

What Do Hard Money Lenders Look For?

Hard money lenders focus on a few important things when deciding if they will lend you money. First, they care about how much money you put down, usually at least 25%. This means they want to see that you have some equity in the deal. Second, they look at the condition and value of the property you wish to buy. They want to make sure it is worth the money you are asking for. Third, they think about your exit strategy, which is how you plan to pay them back, like selling the property for a profit or refinancing it.

Lastly, your experience as an investor matters too. While having good credit can help you get a better interest rate, even people with poor credit can still qualify if the property and their plan seem good.

Questions to Ask a Hard Money Lender

Before choosing a lender, ask:

• How much is the down payment?
• Are there any upfront fees?
• What’s the interest rate?
• Are there prepayment penalties?
• How long does closing take?
• What experience do you have in my market?

At Gustan Cho Associates, we help borrowers understand all costs upfront so there are no surprises.

What Types of Properties Do Hard Money Lenders Finance?

Hard money lenders help people buy different types of properties. They usually lend money for single-family homes not lived in by the owner. They also fund buildings with two to four units or more, which can be for renting or other uses. If someone wants to fix up a house to sell it for a profit, hard money lenders can help with that, too. They also lend money for land where someone wants to build new homes or buildings.

Additionally, these lenders finance commercial properties, which are places used for business. However, hard money lenders do not give loans for homes where the owner lives, because those types of loans have special rules from the government.

What’s New With Hard Money Lending in 2025?

In 2025, hard money lending remains a powerful tool for investors, especially with tightening bank guidelines and rising interest rates. Here are some updates:

• More non-bank investors are entering the space
• Automated valuations speed up the process
• Some hard money lenders offer bridge loans for cash-out or gap financing
• Flexible underwriting is more common for self-employed borrowers

As always, make sure your lender is transparent, experienced, and licensed or bonded where required.

Benefits of Working With Reputable Hard Money Lenders

Gustan Cho Associates partners with top-rated hard money lenders across the country. Here’s what you get:

• Fast approvals and closings
• No red tape or unnecessary denials
• Flexible underwriting for unique situations
• Full support from application to closing

We’ve helped hundreds of real estate investors get funding when banks said no.

Are Hard Money Loans Safe?

Yes—if you work with a reputable lender and understand the terms. Hard money loans are not scams, but some unlicensed or shady lenders may try to take advantage of borrowers.

Here’s how to stay safe:

• Read the loan agreement carefully
• Make sure the lender discloses all fees
• Confirm your repayment plan works
• Only borrow what you can repay

Gustan Cho Associates works only with honest, verified lenders and protects your best interests.

What Happens After You Get the Loan?

Once you close, most hard money lenders will:

• Service your loan (or work with a third-party servicer)
• Provide monthly statements
• Track project progress if it’s a rehab
• Help you prepare for refinancing or sale

If your project is successful, you can refinance into a lower-rate traditional loan or use your profits for the next deal.

Final Thoughts: Are Hard Money Lenders Right for You?

If you need to move fast, don’t qualify for a bank loan, or have a profitable investment deal on the table, hard money lenders can be your best option. They’re not for everyone, but for the right deal, they can unlock big opportunities.

At Gustan Cho Associates, we believe in second chances, creative financing, and working with investors who think outside the box. We’ll guide you through every step of the process and connect you with the right hard money loan for your situation.

Ready to Get Started?

Borrowers who need a five-star national mortgage company licensed in 52 states with no overlays and who are experts on hard money loans, please contact us at 800-900-8569, text us for a faster response, or email us at gcho@gustancho.com. We’re here to help you get funded quickly, easily, and confidently.

Frequently Asked Questions About Hard Money Lenders:

Q: What are Hard Money Lenders?

A: Hard money lenders are private lenders who give loans based on the value of a property, not your credit score. They are great for people who need money fast to buy, fix, or flip a house.

Q: Who Usually Uses Hard Money Lenders?

A: Most borrowers are real estate investors, house flippers, landlords, or builders who need quick funding and cannot or don’t go through a bank.

Q: Can I Use a Hard Money Loan to Buy My Own Home?

A: No. Hard money lenders only give loans for investment properties or business use. They don’t lend for homes you plan to live in full-time.

Q: Do I Need Good Credit to Get a Loan from Hard Money Lenders?

A: Not always. Good credit can help you get a better rate, but even if your credit isn’t perfect, you might still qualify if the deal looks good and the property has value.

Q: How Fast Can Hard Money Lenders Close a Loan?

A: Many hard money lenders can close in 7 to 14 days. That’s much faster than most banks, which may take 30 days or more.

Q: What Kind of Down Payment do Hard Money Lenders Want?

A: Most hard money lenders want you to put down 25% or more. This shows them you have money invested in the deal and helps lower their risk.

Q: What Kind of Properties do Hard Money Lenders Finance?

A: Hard money lenders can finance rental houses, fix-and-flip homes, land for new builds, commercial buildings, and multi-unit properties—but not your main home.

Q: Are Hard Money Lenders Safe to Work with?

A: Yes, as long as you work with a trusted company like Gustan Cho Associates. Always read the terms, ask questions, and make sure the lender is upfront about fees and loan terms.

Q: Why are Interest Rates Higher with Hard Money Lenders?

A: Hard money loans are riskier for lenders, so rates are higher, usually 8% to 14% or more. But they make up for it with speed and flexibility.

Q: How Can Gustan Cho Associates Help with Hard Money Loans?

A: Gustan Cho Associates works with top-rated hard money lenders across the country. We help you get fast approvals, simple terms, and expert support from start to finish.

This blog about “Simple Truth: What Are Hard Money Lenders and How They Help” was updated on May 6th, 2025.