The short version
| Hard money (Larry the Lender) | Conventional mortgage | |
|---|---|---|
| Term | 6 or 12 months, renewable | Typically 15 to 30 years, fully amortizing |
| Rate | 12.99% standard, interest-only | Much lower; see Freddie Mac’s weekly survey |
| Upfront lender fees | 2 points (6 mo) or 3 points (12 mo); no application or appraisal fee | Varies by lender |
| Approved mainly on | The property, valued by Larry from comparable sales | Your credit, income, and debt-to-income ratio |
| Credit check | No hard credit pull; personal guarantee required | Full credit review |
| Time to close | Same-day decision; closing as soon as the next day | Around six weeks on average |
| Max loan on an investment purchase | Typically 70% to 80% for first-time borrowers; higher for repeat borrowers and prime properties | 85% for 1 unit, 75% for 2 to 4 units (Fannie Mae) |
| Property condition | Any investment property type, including fixer-uppers | Generally needs to be in financeable condition |
| Owner-occupied homes | No | Yes |
| Prepayment penalty | None, and no minimum interest | Varies by lender |
Larry Makes Same-Day Decisions
It’s why most investors call a hard money lender at all.
Larry makes decisions the same day, and if the title work and paperwork are ready, closing can happen as soon as the next day. A conventional purchase loan takes a lot longer, around six weeks on average according to industry closing data, because it runs through income verification, a full appraisal, underwriting, and required disclosure waiting periods.
Six weeks is fine for a house you’ll live in. It’s a problem when a seller wants cash terms by Friday, or you’re bidding against investors who can close next week.
What You're Approved On
A bank looks at you. Credit score, income, and debt-to-income ratio all matter, and Fannie Mae’s manual underwriting guidelines cap debt-to-income at 36%, or up to 45% when the borrower meets extra credit and reserve requirements.
Larry looks at the property. He values it himself from comparable sales, and there’s no hard credit pull. A personal guarantee is required, and good credit can still help you borrow a bigger share of the value. But a thin W-2 history or a high debt load won’t sink the deal by itself the way it can with a bank.
How Much You Can Borrow
This one surprises people. On a single-family investment purchase, a conventional loan can go higher. Fannie Mae allows up to 85% of the value on a one-unit investment property purchase, and 75% on two to four units.
Larry’s first-time borrowers typically get 70% to 80% of his valuation, which on a clean single-family rental can mean a smaller loan than a bank would offer. Repeat borrowers, prime properties, and borrowers with good credit can go higher, and raw land usually sits at 40% to 50%.
The catch is the property. A house that needs serious work can be hard to finance conventionally until the work is done. Larry lends on investment property of any type, including the ones that aren’t ready for a bank yet.
What A Loan From Larry Costs
Larry’s standard rate is 12.99%, interest-only, with 2 points on a 6-month loan and 3 points on a 12-month loan. There’s no application fee, no appraisal fee, and no prepayment penalty. On a $200,000 loan held the full 6 months, that’s $4,000 in points plus $12,990 in interest, so $16,990 total.
That’s real money. So the question isn’t whether hard money costs more. It does. The question is what the speed and flexibility let you do that you couldn’t otherwise? If closing fast gets you a property at a price that leaves room for profit after that cost, it’s worth it. If not, use a mortgage.
When Hard Money Makes More Sense
You need to close in days, not weeks, the property needs work before a bank will lend on it, or your income is real but hard to document the way a bank wants to see it. You plan to sell or refinance within a year, so you’ll never pay long-term interest anyway. Or you just don’t want to wait on underwriting to lock up a good deal.
When a Mortgage Makes More Sense
You plan to hold the property for years and rent it out, it’s in good condition, and you’re confident it’ll appraise cleanly without repairs. Your credit, income, and debt-to-income ratio are strong. And you have the time to wait six weeks or so to close.
Can You Use a Mortgage & Hard Money Loan On the Same Deal?
This is how a lot of investors work. Buy with hard money, do the repairs, then refinance into a conventional mortgage once the property is worth more and ready to rent.
Two things make that work with Larry. There’s no prepayment penalty and no minimum interest, so you can pay him off the day your refinance closes and only owe interest for the months you used. And his loans are renewable, so if the refinance takes longer than planned you have room. Ask Larry what a renewal costs before you count on one.
Watch the refinance math. Fannie Mae caps a cash-out refinance on a one-unit investment property at 75% of the value, so the property needs enough equity after repairs to cover what you borrowed.
