Hard Money Bridge Loans: The Ultimate Investor’s Guide

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Hard Money Bridge Loans: The Ultimate Investor’s Guide

Real estate investors know that speed and flexibility are key. Traditional bank loans often fall short for investment properties. Hard money bridge loans offer a fast, flexible solution. They prioritize property value over strict credit scores. In this article, we’ll explore hard money bridge loans, their benefits, and how MoFin Lending can help you secure the financing you need.

It isn’t that banks are hard to find. You drive by them on your commute and hear their ads while listening to podcasts or watching tv. However, when an interesting opportunity comes along such as a fix-and-flip or a rental that needs some renovation before it cash flows, many of the banks that you have familiarity or a relationship with will say “no.” Or, and perhaps worse, they will give the thumbs up but then bog you down in a slog of a process to close on the deal.

Banks just are not set-up for investment property financing. And that’s why non-bank or hard money lenders, like us, MoFin Lending, provide financing for flips and rehab-to-hold deals (or the strategy of buy, rehab, rent, refi, and repeat or “BRRRR”). You can also acquire or refinance a multifamily property, do a ground-up construction project, or purchase/refinance a commercial property through a bridge or hard money loan with a non-bank lender like us. However, lenders that provide this type of financing are not as ubiquitous as banks so investors may not know their products, programs, and requirements.

In this article, we’ll take a look at what bridge or hard money financing is, what it can be used for, some of the general requirements, and its advantages and disadvantages.

Hard Money Bridge Loans: A Quick Overview

Bridge or hard money financing, is an asset-backed or asset-based loan, which has a short term, typically a 12-36 month duration. With these loans, there is no amortization: you make monthly payments of interest only with the principal due in a balloon payment at maturity. Bridge and hard money loans can be used interchangeably, to an extent. They are called bridge because the purpose of the loan is to be a path, or bridge, to more permanent financing (a longer-term loan) or a sale of the subject property.

These loans require less information upfront. It’s usually a quick conversation at the outset to get your deal pre-qualified and issue you a proof of funds. Once you’re in the underwriting process, the requirements are much less stringent compared to a bank: there is minimal documentation required, enabling you to have a quicker closing. This fast turnaround time offers a significant competitive advantage in the investment property space—what seller wouldn’t like a quicker closing for their listing?

Bridge or hard money lenders place the most emphasis on your track record and experience in investing as well your credit score and history. Some other factors are also important: like your liquidity and the numbers on the deal. In comparison, working with a bank usually means that your eligibility stands or falls on your personal income or debt-to-income (“DTI”) and tax returns—personal income and tax returns do not come into play with us and most hard money lenders.

Also, it’s important to note that many traditional lending institutions have property condition requirements/standards, and distressed properties (i.e. properties that need to be renovated or repaired to become a rental or successful flip) may not qualify on that basis alone. Moreover, and this may be the biggest difference between banks and non-banks, the process with traditional lenders is not as fluid, straightforward, or informal as it is with a hard money lender. It often takes quite a while just to get pre-qualified or pre-approved with a bank

What is a Hard Money Loan?

Hard money loans are short-term loans designed for real estate investors. They’re typically used to quickly purchase and renovate properties, offering a faster funding timeline than traditional mortgages. Unlike conventional loans, hard money loans are secured by the property itself—meaning the loan is based on the property’s value, not primarily on the borrower’s credit score. This focus on the asset itself allows for a more streamlined process, which can be crucial in competitive real estate markets. Learn more about hard money loans.

What is a Bridge Loan?

A bridge loan is another short-term financing option, usually for 6-12 months. It helps people buy a new home before selling their current one. Like hard money loans, bridge loans often prioritize the property’s value as collateral. This can make them accessible to a wider range of borrowers. Explore bridge loans in more detail.

Key Differences Between Hard Money and Bridge Loans

While both hard money loans and bridge loans are short-term and often rely on property value as collateral, they have key differences. Hard money loans always come from private lenders, while bridge loans can come from private lenders or traditional banks. This difference can impact interest rates, loan terms, and the application process. Understanding these nuances helps you choose the best financing option for your real estate goals. Compare hard money and bridge loans. Considering a bridge or hard money loan for your next investment property? Contact us at MoFin Lending to discuss your options.

Key Takeaways

Fast financing for real estate investors: Bridge loans offer a streamlined process and quick closing times, giving you a competitive edge in acquiring investment properties.
MoFin Lending supports diverse investment strategies: From fix-and-flips to commercial projects, MoFin provides a range of loan programs tailored to various real estate investment needs.
Work directly with a lender who understands your goals: MoFin’s direct lending approach and transparent process ensure clear communication and efficient closings, making your investment journey smoother.

Benefits of Hard Money Bridge Loans

There are several advantages to going the non-bank route and working with a bridge or hard money lender.

Quick turnaround times

One of the biggest advantages is the quick turnaround time. At MoFin, we review your initial loan request within 1 business day, usually much sooner. If everything checks out, we’ll send you terms we can offer and are able to provide you with a proof of funds or pre-qualification letter if requested. We’ll also let you know how quickly we can close. If you have a certain date you’re aiming to close by, let us know and we’ll confirm whether we can get it done in that timeframe.

These quick turnaround times are vital to getting a competitive advantage when investing in real estate. If you are putting in an offer and you can confidently say that you are able to close in the next 7-21 days or so, that may just put your offer ahead of others and land you that deal.

Flexible underwriting

Given their shorter duration and quick-to-close nature, bridge and hard money loans offer a more flexible underwriting process and have less stringent requirements than a traditional lender’s process. Generally, what we ask for during the underwriting process is a copy of your entity’s documents, your scope of work/rehab budget (if the project requires renovations), proof of insurance (we provide you with guidance as to what we need to see in place), and asset statements (to verify your liquidity and source the down payment; and rest assured, there are a variety of accounts that we consider to be liquid assets). We also ask for you to fill out a property/investment experience form. In addition, we will pull credit and background reports and are more lenient with any derogatory items found there.

If something falls outside of our typical criteria, in our discretion, we may be able to grant an exception. We aim to be flexible and reasonable in our underwriting approach. Granting exceptions is one way we do that, but depending on what the exception is for, we do require compensating or mitigating factors. Those factors are usually things like having a higher-than-average credit score or liquid assets that go beyond what is required for your property/deal, lowering the LTV or LTC, or seeing a significant track record of experience.

Appropriate for multiple property types and deals

Bridge or hard money loans can be used for both single family residences and properties with 2-4 units. The minimum loan amount is $75,000. It can also be used for commercial real estate such as warehouses, light industrial, retail, and office space– the minimum loan amount for commercial properties is $500,000. And, through our bridge program, we can lend against multi-family properties of 5+ units (“MFR”) and mixed-use properties, where the minimum loan amount is $250,000. For all of the above, we can provide a hold-back for rehab costs to address any renovations that the property may need. We also provide loans for ground-up construction deals where we can lend for both the land (we would like to see that the land value or purchase price is at least $50,000) and the construction costs. Typically, on all deals, we like to stay in close proximity to metropolitan statistical areas (“MSAs”) where there is a relatively high population density but can make exceptions with the caveat that we do not lend in rural areas/markets.

While other types of lenders may be limited to financing only a certain type of deal or property, we as a hard money or bridge lender are much more flexible and can consider lending for/against a wide array of real estate investing opportunities.

Utility. Useful for more than just one type of investment strategy

Though hard money or bridge financing is often thought of as a means for acquiring distressed real estate (in other words, for fix-and-flips or rehab-to-hold deals), it also has advantages in many other scenarios.

You may come across a rental deal that does not require any renovations and is rent ready, up to market standards. The seller is fielding numerous offers and for whatever reason they need to close fast. In a situation like this, a bridge or hard money loan can be a perfect fit. You’ll be able to close in as little as 1-3 weeks. Your loan will be a 12-month term, with no prepayment penalty. You will be able to refinance into a 30-year loan in as little as 3 months for a cash-out refinance or immediately with a rate/term refinance with us.

Close in cash so the deal is not lost and get your money back out immediately through delayed financing

You may also find yourself in a hot market or targeting auction deals. You’re in the fortunate position where you can purchase and close in cash. While this is great, it may tie up funds leaving you feeling a bit less secure or unable to pursue other deals that may pop up. When that happens, you can do what is known as a delayed financing or delayed purchase.

In that situation, you close on the property in cash and then, as soon as you can, work with a hard money lender like MoFin to finance the deal. At the closing of the loan with MoFin, you’ll be able to receive the same terms as if we were the lender at the time of purchase. This means that you can potentially receive 75%-85% or so of your purchase price back to you at closing (net of closing costs). Additionally, you can receive the funds for the renovations/rehab in a hold-back. This allows you to take out a significant portion of your cash quickly, without the reduced LTV and seasoning requirements of a cash-out refinance, and still have funds available to you for the renovation.

Get your cash-out while you wait for a sale

There is also the scenario where you have finished renovating the property and have made the decision you’d like to list and flip it. Given that the property is newly renovated, and you likely increased its value, the likely purchaser on your deal is someone who is looking to occupy the property as their primary or secondary residence and not another investor. This means that your accepted offer will be contingent upon bank financing. This can often mean 2-3 months of waiting for you to get some money back out of the deal. With a bridge loan, you can do a cash-out refinance, typically of up to 65% of the now-appraised value of the property to net some cash while you wait for the sale to go through. This will allow you to pursue other deals or pay yourself back for any renovation expenses. In addition, the bridge loan does not have a prepayment penalty, meaning you can pay the loan back as soon as you can without incurring a fee. The payments on the bridge loan are interest-only, and the taxes are not escrowed monthly, so your loan payment is not as high as it would be with a fully amortized loan. If you change your mind and decide to rent it to a tenant hold instead of flipping it, then you can pursue either a cash-out refinance or a rate/term refinance into a 30-year loan with us.

Fast Closing Times

One of the biggest advantages of hard money or bridge loans is the speed. Traditional bank loans can take weeks or even months to close, but with a bridge loan, you can often close in a matter of days. At MoFin, we review your initial loan request within one business day, often sooner. If everything looks good, we’ll send you the terms we can offer and can provide a proof of funds or pre-qualification letter if you need it. This speed can be a game-changer, especially in competitive real estate markets. Imagine locking down a property before other potential buyers even get their paperwork in order—that’s the power of a fast closing.

These quick closing times give you a real edge when you’re investing. If your offer includes a fast closing, say within 7–21 days, it’s much more attractive to sellers and can help you secure the deal. In a hot market, a fast close can be the deciding factor.

Flexible Qualification Requirements

Bridge and hard money loans have more flexible qualification requirements than traditional bank loans. Because they’re short-term and close quickly, the underwriting process is streamlined. We focus on your track record and experience as an investor, along with your credit score and history. We also consider your available cash (liquidity) and the details of the deal itself. This differs from banks, which usually prioritize your personal income, debt-to-income ratio, and tax returns—factors that don’t come into play with most hard money lenders, including MoFin. This flexibility can be particularly helpful for investors who are just starting out or who have complex financial situations.

At MoFin, we keep our requirements clear and straightforward. We’ll ask for your entity documents, your renovation budget (if applicable), proof of insurance, and asset statements to verify your liquidity and down payment source. We also do a credit and background check. We’re open to considering exceptions to our typical criteria if something falls outside the norm, especially if you have a strong credit score, significant liquid assets, a proven investment track record, or can offer a lower loan-to-value ratio. We understand that every deal is unique, and we work with our borrowers to find solutions that fit their specific needs.

Asset-Based Lending

Hard money loans are asset-based, meaning they’re secured by the property itself, not your credit score. This is a key difference from traditional mortgages. This makes them a powerful tool for real estate investors looking to move quickly on a property, especially one that needs renovations. Hard money loans are short-term and often used to purchase and renovate properties quickly. Think of it this way: the property’s potential is the primary focus, making it easier to secure funding even if your personal finances aren’t perfect.

This focus on the property as collateral opens up opportunities for investors who might not qualify for traditional financing. It’s the property’s potential that matters most, not necessarily your personal financial history. This can be a huge advantage for investors looking to capitalize on opportunities that banks might overlook.

Short-Term Financing Solution

Bridge loans, also known as hard money loans, are short-term financing solutions, usually lasting 12–36 months. They’re designed to bridge the gap between purchasing a property and securing long-term financing or selling the property. These loans typically involve interest-only payments each month, with the principal due as a balloon payment at the end of the term. This structure makes them ideal for short-term projects like fix-and-flips or for quickly acquiring a property before refinancing into a longer-term loan. It’s a way to get the capital you need quickly and efficiently, without getting tied down to a long-term commitment.

At MoFin Lending, our bridge loan program offers this type of flexible, short-term financing. We also offer rental loans and commercial loans to meet a variety of investment needs. Our goal is to provide a quick, easy, and transparent process to help you achieve your real estate investment goals. We believe in open communication and clear expectations, so you always know where you stand.

Why Choose MoFin for Your Hard Money Bridge Loan?

While many of the requirements and terms associated with bridge or hard money are uniform across the industry, MoFin Lending has set itself apart from the industry.

Multifamily, mixed-use, and commercial property types are eligible

Many hard money lenders lend only against 1-4 units, which is great but does not account for the real estate investor that wants to explore new opportunities or target bigger deals. For example, multifamily properties of 5-10 units are a great way to expand and often lead to a higher return, either as a flip or rental. The same goes for mixed-use or commercial properties. However, if you come across one of these property types, and perhaps that deal also calls for rehab, you may be lost on how to go about financing this since your typical hard money lender does not lend for those property types.

In fact, most hard money or bridge lenders would not be able to lend in that scenario. In most cases, multifamily, mixed-use, and commercial properties fall under the lending umbrella of small balance commercial lenders. The problem? Most small-balance commercial lenders have a minimum loan amount of $1,000,000, and they may not be able to provide a hold-back for the renovations.

In comparison, MoFin’s minimum loan amount for multifamily properties is $250,000 and we can also provide financing for the renovations through a rehab hold-back. We can also lend against mixed-use properties where the residential space is more than 50% of the property’s square footage and at least 70% of the total gross potential rental income. On the commercial side, we lend against retail, office buildings as well as light industrial properties and warehouses. Our minimum loan amount in this program is $500,000, and we can provide funding for the renovations in the form of a rehab hold-back. Establishing a relationship with a lender that can lend for a variety of deals can open, and more importantly, add(!) doors for many real estate investors.

Direct lender. Flexibility during the underwriting process

MoFin is a direct lender and we alone handle the underwrite process of our loans. We also use our own capital to lend to real estate investors/borrowers. This gives us much more control over the underwriting process allowing us to more quickly process the loan – and preventing you from getting tangled up in a bureaucratic process.

It is helpful to note whether the lender you are working with is a direct lender and/or will be table-funding at closing. Table-funding is the process of having someone else come in behind the scenes at closing to provide the capital for your loan. While there is nothing wrong with table-funding, it does add another party into the mix. This may lead to delays because the entity you are dealing with throughout underwriting may not have the ultimate decision-making ability. They may also have no control when the actual party providing the funds for the transaction will be ready to close. It is always important to know who you are working with, the way they conduct business, and assess whether the risks and benefits associated with that is optimal for your investment strategy and goals.

When you work with MoFin, someone with decision making authority will always be involved in the handling of your loan from day 1. Not many other lenders can say that.

Ground-up construction

Our bridge loan for ground-up construction does not just cover 100% of your construction or building costs, but we can also lend for the purchase, or do a cash-out refinance, of the land. Some experience is required: we would need to see that you have completed three flips or rehab projects (where the reno costs exceeded 75% of your purchase price) or one prior ground-up construction deal. As far as leverage ratios go, if you meet the experience requirement then you will qualify for anywhere between 50%-60% of appraised value or purchase price as the initial funding amount at closing. We can also provide up to 100% of your construction costs in a hold-back to be released to you in draws. The loan will be capped at 80%-90% of the total project cost. The total loan amount is capped at 60%-70% of the property’s as-built value (or “ARV”). Where exactly you fall in these ranges depends on your experience and credit score. We have a minimum credit score requirement of 640 for this product. There are a few moving parts, but you can quickly get a breakdown of terms by making a request through the website or directly by phone and email.

MoFin Lending’s Expertise in Real Estate Investment

We’ve covered the general benefits of bridge loans, but let’s talk specifics about how MoFin Lending can help you achieve your real estate investment goals. We offer a range of loan programs designed to meet diverse investment needs, and our streamlined process makes securing financing efficient and transparent.

Bridge Loans at MoFin

Our bridge loan program offers short-term financing solutions, typically with a 12–36-month duration. These loans are interest-only, meaning you make monthly interest payments, with the principal due as a balloon payment at maturity. This structure can be particularly advantageous for fix-and-flip projects or short-term holds, providing you with the flexibility to manage your cash flow effectively. We understand the fast-paced nature of real estate investment, and our bridge loans are designed to help you seize opportunities quickly. Learn more about our bridge loan options.

Rental Loans at MoFin

Looking to expand your rental portfolio? Our rental loans provide financing for both single-family residences and properties with two to four units, with a minimum loan amount of $75,000. We also offer rental loans for commercial properties, including warehouses, light industrial spaces, retail locations, and office buildings. This versatility allows you to explore various rental investment strategies, whether you’re focused on residential or commercial properties. Explore our rental loan programs today.

Commercial Loans at MoFin

For larger-scale investments, our commercial loan program caters to projects with a minimum loan amount of $500,000. We finance retail spaces, office buildings, light industrial properties, and warehouses. A key feature of our commercial loans is the availability of rehab holdbacks, which provide funding for necessary renovations. This allows you to improve the value of your commercial property and maximize your return on investment. Discover our commercial loan solutions.

Quick and Easy Process with MoFin

Time is of the essence in real estate investing. At MoFin Lending, we pride ourselves on our quick and easy process. We review your initial loan request within one business day, often sooner. This rapid response time allows you to secure pre-qualification quickly and present a strong offer to sellers, giving you a competitive edge in the market. We understand the importance of speed and efficiency, and we work diligently to ensure a seamless financing experience. Contact us today to learn more.

Transparent Costs and Certainty of Closing with MoFin

Transparency and certainty are crucial when it comes to securing financing. At MoFin Lending, we maintain open communication throughout the entire loan process. From day one, you’ll work directly with a decision-maker who has the authority to handle your loan. This direct access eliminates unnecessary delays and ensures a smooth and efficient closing. Our transparent approach to costs and our commitment to certainty of closing provide you with the confidence you need to pursue your investment goals. Reach out to discuss your financing needs.

MoFin Hard Money Bridge Loan Requirements

We touched upon some of the requirements throughout the article so far. Each program, and within that program each product, may carry its own requirements and criteria. To go through those in depth would be a separate article so for now, we will touch upon some general requirements that pertain to our bridge loans. It is important to note, like mentioned above, exceptions within reason, and with compensating factors, can be made. The requirements do change so it’s important to contact us directly to discuss your deal, but the below can be used as guidance.

Credit

Generally speaking, credit is important. We not only pay attention to your score (we pull what is called a tri-merge report and obtain your score from each of the 3 credit bureaus) but also the contents of the credit report and your credit history. When looking at your score, we typically use the middle score of the 3 or the lower of your 2 scores if only two bureaus are reporting. Our minimum credit score requirement is 650 for bridge or hard money loans, but through compensating factors such as experience or liquidity, we may be able to lend if your score is below that. Typically, we do not go below 600 even with compensating factors.

Just as important as your credit score is the content of your credit report, background report, and credit history. The major derogatory items that may disqualify you are any missed or late mortgage payments in the last 12-24 months. A recent or pending foreclosure, short sale, or bankruptcy are problematic and may be insurmountable. Otherwise, accounts in collections or charge-offs, as well as outstanding liens and judgments will draw attention and require some additional information from you to overcome. It’s best to discuss any of these items at the outset to see what impact they could have and if exceptions can be made. We understand it’s not always black and white so we’re happy to see if there’s a path forward in spite of any of these being present in your report.

Location and the appraisal matter

While we offer bridge loans for many different building, property, and deal types across the US, we tend to target metropolitan statistical areas (“MSAs”), and non-rural markets are ideal. The property you are attempting to get a loan for should have comparable units/properties within a 1-3-mile radius (this can be extended to 5 miles by exception if the property is not marked rural in the report) that were sold within the last 6-12 months. Also, as the lender, we handle the appraisal process and order a report typically through an appraisal management company or an approved appraisal company. It’s important to note, as a borrower, you should never order an appraisal directly with an appraiser or appraisal company and expect to be able to use that for financing. All lenders will have their internal policies and procedures when it comes to how the appraisal was ordered and by/from whom it was ordered. This is a critical part of the loan process.

Liquidity and the down payment

On purchases, MoFin, like most lenders, does have a down payment sourcing requirement, meaning we like to know where the down payment is coming from. It should be coming from assets that the borrowers own and not a gift of equity, seller second, gap funding, or the like. You can use funds from your personal or business accounts, however.

We also have a liquid reserve requirement, which is satisfied by providing us with the 2 most recent account statements. We want to verify that you not only have the proceeds for the down payment but also 6 months of interest-only payments. And, if your loan has a rehab hold-back then we’d like to see that you have an additional 10% of the rehab budget in reserves. The liquid reserve requirement is just a check on your liquidity: you do not have to put any additional funds into escrow or the deal. You can use a variety of accounts to satisfy this requirement, from investment and retirement accounts to personal and business accounts. The more liquidity you can show, the better, as it can serve as a compensating factor for any exception on your loan.

No personal income or tax return requirement

One of the requirements we do not have is around your employment status, income, debt-to-income ratio, and tax returns – we do not require any of that information and they do not play a factor in getting a loan through MoFin.

Documentation Needed for a Hard Money Loan with MoFin

One of the biggest perks of bridge loans is the streamlined documentation process. Because these loans are short-term and asset-backed, we don’t need the same level of paperwork as a traditional bank loan. Generally, we’ll ask for a copy of your entity documents, your scope of work/rehab budget (if you’re renovating), proof of insurance, and asset statements. The asset statements help us verify your down payment source and available liquidity—and we consider a variety of accounts as liquid assets.

We also ask you to complete a property/investment experience form. This helps us understand your background and expertise in real estate investing. We’ll pull credit and background reports, too, but we’re generally more lenient with any bumps in the road than a traditional lender would be.

Equity Requirements for MoFin Bridge Loans

For purchase loans, we want to know the source of your down payment. Like most lenders, we prefer the down payment to come from assets you own, not from sources like gift equity, seller seconds, or gap funding. Using funds from your personal or business accounts is perfectly acceptable.

We also have a liquid reserve requirement. This means providing your two most recent account statements so we can confirm you have enough cash on hand for six months of interest-only payments. If your loan includes a rehab hold-back, we also like to see an additional 10% of the rehab budget in reserves. Don’t worry, you don’t have to lock these reserves away in escrow; we just need to verify your liquidity. And, similar to the down payment, various account types—including investment, retirement, personal, and business accounts—can satisfy this requirement.

Credit Score Considerations at MoFin

While credit score is a factor in our lending decisions, we look at the bigger picture. We pull a tri-merge credit report (meaning we get your score from all three credit bureaus) and typically use the middle score, or the lower of two scores if only two bureaus are reporting. Our minimum credit score requirement for bridge loans is 650. However, we might be able to work with you even if your score is a bit below that, especially if you have compensating factors like extensive experience or strong liquidity.

Beyond the score itself, we also review the details within your credit report, background check, and overall credit history. Recent missed or late mortgage payments can be a red flag, as can foreclosures, short sales, or bankruptcies. While these don’t automatically disqualify you, they’ll require additional explanation. Other issues, like collections, charge-offs, liens, and judgments, also warrant further discussion. We encourage you to be upfront about any credit concerns you have so we can determine the best path forward. Contact us to discuss your specific situation and explore your options.

Getting Approved for a MoFin Hard Money Bridge Loan

It’s easy to get terms from MoFin. Here’s what the process looks like:

Submit your request through our website, over the phone, or by email.
Once we receive your request and determine you are qualified, we will send you the terms of your loan.
If our quote works for you, we will then send over a more comprehensive Term Sheet that lays out the underwriting requirements, process, as well as your monthly payment and a Closing Cost Estimate.
After you electronically sign the Term Sheet and pay the application fee, the underwriting process will begin.
You’ll be set up with access to the borrower portal. You will see the document requests there.
Close within 1-3 weeks.

The MoFin Loan Application Process

Getting terms from MoFin is straightforward. You can submit your request through our website, give us a call, or send us an email. We’ll review your request, usually within one business day. If everything looks good, we’ll send over the loan terms, including how quickly we can close. If you have a specific closing date in mind, let us know—we’ll do our best to accommodate.

If you’re happy with the initial terms, we’ll send a detailed Term Sheet outlining the underwriting requirements, the process, your estimated monthly payment, and closing costs. Once you electronically sign the Term Sheet and pay the application fee, the underwriting process officially begins. We’ll set you up with access to our borrower portal, where you can easily view all document requests and upload the necessary paperwork. From there, we aim to close within one to three weeks.

Tips for a Smooth Application with MoFin

While we have specific requirements for our loan programs (which we’re happy to discuss with you directly), we also understand that every situation is unique. We’re open to considering exceptions, within reason, and with compensating factors. For example, if your credit score is slightly below our minimum requirement, but you have extensive experience and strong liquidity, we may still be able to work with you. We believe in open communication and encourage you to discuss any potential hurdles upfront so we can explore possible solutions together. We’re always happy to see if there’s a path forward, even if your situation isn’t perfectly textbook.

Understanding MoFin’s Loan Terms

While each loan program has specific criteria, here’s a general overview of what you can expect when applying for a bridge loan with MoFin. Credit is important, and we’ll review both your credit score and the details of your credit history. Our minimum credit score requirement for bridge loans is 650. We also require two recent account statements to verify your liquidity and confirm you have reserves to cover the down payment and six months of interest-only payments. If your loan includes a rehab hold-back, we’ll also want to see an additional 10% of the rehab budget in reserves. One thing we *don’t* require is information about your employment status, income, debt-to-income ratio, or tax returns. These factors don’t play a role in our loan approval process. We focus on your investment experience, creditworthiness, and the specifics of the deal itself.

Ready to Explore Hard Money Bridge Loans?

Every investor deserves to work with a lender that will remove stress from the equation. The financing of your investment property should be a smooth process with communication and transparency from day 1. It is also important to work with a lender that understands the nature of the deal. While a bank’s terms may be attractive, its process and underwriting requirements do not facilitate the growth of your real estate portfolio. Hard money and bridge lenders exist for that very reason. The more knowledge and understanding you have about the various products non-bank lenders, like MoFin, can offer, the better served you’ll be as you seek real estate investment opportunities.

Bridge Loan Alternatives

Bridge loans are helpful tools, but they aren’t the only option. Before jumping into a bridge loan, consider these alternatives, especially if you’re looking to finance an investment property:

Home Equity Loans and HELOCs

If you have equity in your current home, a home equity loan or HELOC offers a lower-interest alternative to bridge financing. A home equity loan provides a lump sum of cash based on your home’s equity, with longer repayment terms and typically lower interest rates than bridge loans. Think of it as a traditional loan with your house as collateral. This can be a good option for financing renovations or making a down payment on an investment property. A HELOC, on the other hand, works like a credit card. You access a line of credit secured by your home equity and borrow only what you need, up to your approved limit. This flexibility can be attractive for managing renovation costs or making a down payment on a new property.

80/10/10 Loans (Piggyback Loans)

An 80/10/10 loan can help you avoid private mortgage insurance (PMI) if you can’t afford a 20% down payment on your new home. It involves taking out two mortgages simultaneously: one for 80% of the home’s price and a smaller second mortgage for 10%. The remaining 10% comes from your down payment. The second mortgage, at 10%, acts like a short-term bridge loan, allowing you to reach the 20% threshold and avoid PMI. You can then pay off this smaller loan more quickly or refinance it into the first mortgage later. While helpful for avoiding PMI, this approach still involves two mortgages, so carefully consider your ability to manage both payments.

Hard Money Loan Use Cases

Hard money loans, while carrying higher interest rates, can be a lifeline in specific situations:

For Borrowers with Poor Credit

Hard money loans are a viable option for borrowers with less-than-perfect credit. Unlike traditional mortgages, hard money loans are secured by the property itself, not the borrower’s creditworthiness. This makes them accessible to investors who might be turned away by conventional lenders. The focus is on the value of the property being purchased, making it a potential solution for those with credit challenges. This can be particularly useful for fix-and-flip projects where speed and access to capital are crucial.

Avoiding Foreclosure

For homeowners facing foreclosure, a hard money loan can provide a last-resort solution. If you have substantial equity in your home, a hard money lender may be willing to provide a loan to pay off the existing mortgage and stop the foreclosure process. This can give you time to sell the property or refinance into a more sustainable long-term loan. However, it’s crucial to weigh the risks and costs carefully, as hard money loans come with higher interest rates and fees. Consider contacting MoFin Lending or another lender specializing in these situations to discuss your options.

Bridge Loan Use Cases (Beyond Investors)

While often associated with investors, bridge loans can also benefit individuals in certain circumstances:

Purchasing a New Home Before Selling Your Existing Home

A common use case for a bridge loan is bridging the gap between buying a new home and selling your current one. It allows you to make a non-contingent offer on a new property, making your offer more attractive to sellers in competitive markets. This can be especially helpful if you need to move quickly or don’t want to risk losing your dream home while waiting for your current house to sell. If you’re considering this option, explore MoFin Lending’s bridge loan programs to see if they fit your needs.

Bridge Loan Risks

While bridge loans offer advantages, it’s essential to be aware of the potential downsides:

Potential for Foreclosure

One of the most significant risks associated with bridge loans is the potential for foreclosure on your existing property. If your current home doesn’t sell as quickly as anticipated, you’ll be responsible for two mortgage payments, plus the higher interest rate on the bridge loan. This can put a strain on your finances and, in a worst-case scenario, lead to foreclosure if you can’t keep up with the payments. Carefully assess your ability to carry two mortgages and have a contingency plan in place. Before proceeding with a bridge loan, discuss your situation with a financial advisor or reach out to MoFin Lending to explore alternative financing solutions.

Frequently Asked Questions

What are the main differences between hard money loans and traditional bank loans for investment properties?

Hard money loans prioritize the property’s value as collateral, leading to quicker approvals and less stringent documentation requirements compared to bank loans. Banks often focus on personal income, debt-to-income ratio, and tax returns, which are not primary considerations for hard money lenders like MoFin. Also, the approval and closing process for hard money loans is significantly faster, often within a few weeks, while bank loans can take much longer.

If I have a lower credit score, can I still qualify for a hard money loan with MoFin?

While MoFin has a minimum credit score requirement, they are willing to consider borrowers with scores below that threshold if there are compensating factors. Strong liquidity, a proven investment track record, or a lower loan-to-value ratio can increase your chances of approval even with a less-than-perfect credit score. It’s best to contact MoFin directly to discuss your specific situation.

What types of properties are eligible for financing through MoFin Lending?

MoFin offers financing for a wide range of property types, including single-family residences, 2-4 unit properties, multifamily properties (5+ units), mixed-use properties, and commercial properties such as warehouses, retail spaces, and office buildings. They also offer financing for ground-up construction projects.

What is the process for applying for a hard money loan with MoFin?

You can submit a loan request through MoFin’s website, by phone, or via email. They will review your request promptly, usually within one business day, and provide you with loan terms if you pre-qualify. If you accept the terms, you’ll receive a detailed Term Sheet outlining the requirements and costs. Once you sign and pay the application fee, the underwriting process begins, and you’ll be given access to a borrower portal to manage your documents. Closing typically occurs within 1-3 weeks.

What are the potential downsides of using a hard money loan for my real estate investment?

Hard money loans typically have higher interest rates than traditional bank loans due to their shorter terms and faster processing. It’s essential to factor these higher rates into your investment calculations. Also, the shorter loan term means you’ll need an exit strategy, such as refinancing or selling the property, within a relatively short timeframe.