Hard Money

Hard Money Loans ## What Is Hard Money Lending? Hard money lending is asset-based lending — the loan decision is based primarily on the value of the collateral (the property), not the borrower's creditworthiness. This contrasts fundamentally with conventional lending, where the borrower's income, credit score, debt-to-income ratio, and employment history drive the underwriting decision. The term "hard money" refers to the "hard asset" (real property) securing the loan. Hard money lenders are typically private individuals, investment funds, or mortgage companies who operate outside the conventional lending system. In California, when a licensed real estate broker arranges a hard money loan, the usury exemption allows any interest rate to be charged — making hard money lending economically viable even at very high rates. --- ## Who Uses Hard Money Loans Hard money loans fill a critical market niche. Borrowers who turn to hard money include: Fix-and-Flip Investors: The most common hard money borrowers. They purchase distressed properties, renovate them, and sell at a profit — typically within 6–18 months. Speed of closing and the ability to finance properties in poor condition (which conventional lenders won't touch) make hard money ideal. Developers: Land developers and construction borrowers who need short-term financing to acquire and entitle land before obtaining a construction loan. Hard money bridges the gap. Borrowers with Credit Issues: Borrowers who cannot qualify for conventional financing due to recent bankruptcy, foreclosure, low credit scores, or irregular income (self-employed, investors with complex tax returns showing losses). Hard money lenders look at the asset, not the credit file. Speed-of-Closing Situations: When a buyer needs to close in 5–10 days (foreclosure auction, competitive seller situation), hard money can close in days rather…