Bridge or Hard Money Financing

Whether you’re new to real estate investing or an industry titan, you know that banks are vital but often lack speed and flexibility. Add to that their focus on lending for owner-occupied, primary, or secondary residences, and it becomes clear that banks underserve the market when it comes to loans for investment properties. 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.

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.

What is a bridge or hard money loan?

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 are the advantages of bridge or hard money 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.

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.

What are the advantages of MoFin’s bridge or hard money financing?

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.

What are some of the hard money loan requirements for a bridge loan through MoFin?

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.


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.

What’s the process like to get approved for bridge or hard money financing?

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

  1. Submit your request through our website, over the phone, or by email.
  2. Once we receive your request and determine you are qualified, we will send you the terms of your loan.
  3. 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.
  4. After you electronically sign the Term Sheet and pay the application fee, the underwriting process will begin.
  5. You’ll be set up with access to the borrower portal. You will see the document requests there.
  6. Close within 1-3 weeks.

The bottom line

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.

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