What is a hard money lender, and what do they do?
A hard money lender is a private company that makes short-term loans secured by real estate. Instead of qualifying you on credit scores and income, a hard money lender looks at the property and the deal, especially what the house will be worth after it's fixed up.
How a hard money loan works
A hard money loan is built for investors who need to buy, renovate and resell or refinance a property within months, not decades. The loan is secured by the property itself, usually with a first mortgage, so the property's value is what matters most.
Most hard money loans are short-term, often a matter of months, and are paid off when the investor sells the house or refinances into a long-term loan.
What hard money lenders fund
- Fix and flip: buy a distressed house, renovate it and sell it.
- BRRRR: buy and rehab a rental, then refinance into long-term debt once it's rented.
- New construction: build a home from the ground up, with funds released in stages.
- Bridge financing: close quickly on a property while longer-term financing is arranged.
How hard money lenders decide how much to lend
The key number is the after-repair value (ARV): what the property should sell for once the work is done, based on closed sales of similar homes nearby. Most hard money lenders cap the loan at a percentage of ARV. At Prairie Stone Lending, we lend up to 70% of ARV and can cover up to 100% of the purchase price and rehab budget when the total fits under that limit. See how the 70% rule works.
Why investors use hard money
- Speed: a hard money lender can close in days, so you can win deals that need a quick closing.
- Flexible qualification: the decision is based on the deal, not a W-2 or a debt-to-income ratio.
- Distressed properties: hard money lenders fund houses that need work, which many banks won't.
- Rehab funding: renovation money can be built into the same loan and released in draws.
The trade-off is cost: hard money is priced higher than a long-term bank mortgage, because it's short-term and riskier for the lender. Investors use it for the months the project needs, then sell or refinance. Compare hard money and bank loans.
Hard money lending in Wichita
Prairie Stone Lending is a Wichita-based hard money lender serving Wichita, Sedgwick County and the surrounding areas. Our loans are 100% asset-based, with no minimum credit score and no income verification. Pre-approval usually takes about an hour, and we can fund in as little as 3 days.