Hard Money vs. Private Money: What California Borrowers Must Qualify For
Hard money and private money both fill financing gaps for California real estate investors, but they underwrite deals differently. This guide breaks down the qualifications each lender type typically requires, how they evaluate equity, credit, and paperwork, and practical steps you can take to speed approval on time-sensitive deals. You’ll get clear checklists for hard and private money approvals, worked examples of loan-to-value (LTV) math, and program-specific guidance for purchases, fix-and-flip projects, bailouts, seconds, commercial loans, DSCR, and P&L approvals. We also compare terms, timelines, and common fees so you can match a deal to the right lender and prepare the exact documents that reduce friction. Lastly, you’ll see how a California-based private hard money lender evaluates deals and what timelines to expect when funding is urgent.
Key Qualifications for Hard Money Loans in California
Hard money is asset-first, short-term financing where the property’s equity is the dominant qualification rather than conventional credit history. Lenders focus on the collateral, projected after-repair value (ARV) when relevant, and a credible exit plan that shows how the loan will be repaid by sale or refinance. Borrowers should supply property condition evidence, realistic rehab budgets for renovation deals, and documentation that supports value claims — a well-organized package speeds underwriting and reduces appraisal or title delays. Below is a practical checklist of the most common hard money qualifications underwriters expect from California borrowers before a formal application.
Common hard money qualifications include:
- Sufficient equity in the property measured by LTV or ARV-based calculations.
- A documented exit strategy showing sale, refinance, or a rental plan within the loan term.
- Property condition reports or contractor bids when financing rehab work.
- Basic borrower ID and asset verification to confirm down payment or reserves.
- Title clearance, insurability, and no unresolved senior liens that would prevent funding.
When these items are clear, underwriters can approve faster; the next section explains how equity mechanics determine loan size and approval speed.
How Property Equity Affects Hard Money Approval
Equity sets the ceiling for most hard money loans because it reduces loss severity if the lender must foreclose and sell the asset. Lenders may base equity on the purchase price, current market value, or ARV — and which base they use changes the LTV a borrower can get. For example, rehab-focused lenders often underwrite to ARV and might offer around 60% of ARV for fix-and-flip deals, while select commercial ARV scenarios can support higher percentages. Supplying comps, contractor scopes, and photos tightens ARV estimates, shortens appraisal timelines, and supports higher LTVs. In short: clear evidence of equity increases loan size and the odds of a quick approval.
Once equity is established, lenders next look for a credible exit plan that shows how the loan will be repaid on schedule.
Why a Clear Exit Strategy Matters for Hard Money Borrowers
An exit strategy tells the lender how and when you’ll repay the loan — typically by sale, refinance, or converting to long‑term financing. Lenders evaluate feasibility, timing, and back-up plans. Preferred evidence includes listing agreements for planned sales, pre-qualification letters for refinance exits, or rent-roll projections for hold-to-rent cases. Exit timing influences term selection and pricing: shorter, credible exits can justify lower points and smaller interest reserves, while longer or riskier exits raise pricing and reserves. Presenting multiple viable exits or staged contingencies reduces perceived risk and often speeds underwriting.
Summarizing your exit on a one-page plan helps both private and hard money underwriters visualize repayment — which leads us into private money requirements.
Essential Requirements for Private Money Loans in California
Private money lending leans more on relationships, borrower track record, and tailored documentation than strictly asset-driven hard money. Private lenders typically weigh experience, references, and deal structure alongside property equity. Common documentation requests include bank statements, profit-and-loss (P&L) statements for business-backed investors, and a concise investment plan. Unlike institutional hard money, private lenders may accept flexible terms when borrowers demonstrate a history of successful projects or strong personal collateral. The list below shows practical documentation and relationship-building steps that position borrowers for favorable private-money terms.
- A clear investment plan or business case that explains the deal and exit.
- Financials such as recent bank statements, tax returns, and P&L statements.
- References, summaries of past projects, and proof of borrower experience.
- Documented liquidity or source-of-funds for down payment and contingency reserves.
- Open communication about timelines and any encumbrances on the property.
Putting these items forward reduces perceived risk; the next section explains which documents and plans strengthen private-money approvals.
How Financial Docs and Investment Plans Influence Private Money Approval
Thorough financial documentation shows capacity and lowers lender uncertainty — especially when credit is secondary to relationships and deal mechanics. Private lenders often ask for recent bank statements, P&L statements for business investors, and tax returns to verify income. Consistent cash flow and adequate reserves strengthen a loan case. A concise investment plan covering purchase price, rehab budget, timeline, ARV comps, and exit strategy helps lenders test assumptions quickly and justify loan sizing. Delivering well-organized docs upfront speeds diligence and often leads to faster discretionary decisions.
Strong financial narratives and organized paperwork naturally segue into the interpersonal side of private lending, where relationships shape terms.
What Role Do Relationships and Credit Play in Private Money Lending?
Private lending is discretionary and trust‑based: referrals, a proven deal history, and prior repayment performance can substitute for strict underwriting metrics. Credit is considered but often secondary — a solid relationship can offset lower credit scores when paired with high equity or a compelling plan. Borrowers build credibility by sharing past deal summaries, lender or broker references, and transparent financials. Structuring loans with sensible covenants or extra collateral further reduces perceived risk. For many private lenders, the combination of relationship, documentation, and collateral determines pricing and flexibility more than any single metric.
That relationship-driven approach contrasts with the more formulaic hard money model, which we compare next.
How Hard Money and Private Money Differ in California
Hard money and private money overlap, but they usually diverge on underwriting focus, speed, and negotiability. Hard money is standardized around property equity and collateral metrics, with program-based LTV bands, fast appraisal-driven approvals, and transparent fee schedules. Private money is more relationship-driven and negotiable — repeat borrowers or unique assets can get bespoke terms. The table below summarizes the main contrasts to help you choose the right path for a specific transaction and risk profile.
| Characteristic | Hard Money Lender | Private Money Lender |
|---|---|---|
| Underwriting focus | Property equity and ARV | Relationship, borrower track record |
| Speed | Fast with complete docs (appraisal, title) | Variable; can be faster for trusted borrowers |
| Typical flexibility | Program-based, limited negotiation | Negotiable terms based on trust and structure |
| Documentation emphasis | Title, appraisal, rehab bids | Bank statements, P&L, references |
| Use cases | Fix-and-flip, bridge loans, bailouts | Niche deals and speed without institutional limits |
This comparison helps determine which lender fits a given transaction; the next sections dive into terms, timelines, and LTV differences in more detail.
Main Differences in Loan Terms, Speed, and Flexibility
Hard money typically offers defined short-term terms (bridge or rehab), predictable interest bands, and standard points and fees that reflect quick-turn underwriting — ideal for fast purchases or renovations. Private money is more flexible: experienced, repeat borrowers can negotiate amortization, interest structures, and fee arrangements. Speed depends on documentation readiness: hard money moves quickly with clear title and appraisal, while private lenders can be even faster for trusted borrowers but may require subjective vetting. Choose hard money for standardized, transactional speed; choose private money when relationships yield tailored terms.
Those differences feed directly into how LTV and credit are handled, discussed next.
How LTV Ratios and Credit Requirements Compare
Hard money LTV bands in California vary by program and asset type: residential ARV-based rehab deals commonly fall in the 60–70% ARV range, while stronger commercial assets or select exceptions may support higher LTVs. Private money sometimes accepts higher combined LTVs when backed by strong personal guarantees or additional collateral, though this typically brings higher pricing. For hard money, credit usually affects pricing more than approval; private lenders consider credit as part of overall trustworthiness but will negotiate terms for experienced borrowers. Exceptions to standard LTV or credit rules occur when equity, a clear exit, or borrower reputation materially reduce lender risk.
Knowing program-specific LTVs and timelines helps you pick the right product; the next section outlines specialized programs available to California investors.
Specialized Loan Programs Fidelity Funding Offers California Borrowers
Fidelity Funding | Hard Money Loans offers a range of private hard money programs for California investors, emphasizing equity-based underwriting and quick decisions. Programs include purchase loans, fix-and-flip financing, foreclosure bailouts, second trust deeds (seconds), commercial loans, DSCR loans, and P&L-based approvals. Fidelity Funding focuses on fast approvals and flexible underwriting that prioritizes property equity over rigid credit rules, with stated capabilities like approvals within 48 hours and funding in as little as 5–7 days when documentation is complete. The table below summarizes typical program parameters to help you choose the right product for time-sensitive transactions.
| Program | Typical LTV | Typical Term | Typical Use Case | Key Documents | Funding Timeline |
|---|---|---|---|---|---|
| Purchase Loans | 60–80% (select deals up to 80–90%) | Short-term bridge | Quick acquisitions | Purchase contract, proof of funds | Approve in 48 hours, fund 5–7 days |
| Fix & Flip | 60% of ARV typical | 6–12 months | Rehab and resale | Rehab budget, contractor bids, comps | Appraisal + title review |
| Foreclosure Bailouts | Lower LTV, urgent | Short-term | Prevent foreclosure | Proof of urgency, payoff statements | Rapid turnaround, urgent funding |
| Seconds | Combined LTV assessed | Term varies | Bridge equity gaps | Senior lien info, title report | Depends on title clearance |
| Commercial / DSCR | Varies by asset | 12–36 months | Income-producing properties | Rent rolls, DSCR calc, financials | Standard diligence |
| P&L Approvals | LTV tied to income | Term varies | Small commercial / investor deals | P&L, bank statements | Case-by-case review |
This program snapshot shows how Fidelity Funding aligns products to investor needs; the following sections explain purchase and fix-and-flip mechanics and summarize the less common specialized options.
How Purchase Loans and Fix-and-Flip Financing Work
Purchase loans and fix-and-flip financing concentrate on quick acquisition and renovation, underwriting to either purchase price plus rehab scope or to ARV for rehab-heavy projects. For purchases, lenders typically require a signed purchase contract, proof of funds for your down payment, and title search results; approval hinges on equity and market comps. Fix-and-flip deals need a detailed rehab budget, contractor bids, and ARV comps so lenders can structure draws and holdbacks; draws are released against completed work verified by inspections. Timelines include approval, appraisal, title, and closing — complete packages shorten each step and enable faster funding.
Submitting full purchase contracts and rehab scopes upfront directly supports faster decisions, which matters most for bailouts and seconds.
Foreclosure Bailouts, Seconds, Commercial, DSCR, and P&L Options
These specialized products address urgent or atypical needs and require specific documentation and underwriting triggers. Foreclosure bailouts prioritize speed and need payoff statements and proof of urgency; seconds require combined-LTV analysis and clear senior lien details; commercial and DSCR loans depend on rent rolls and debt-service coverage calculations; P&L approvals evaluate business income and bank statements rather than traditional payroll documentation. Each product calls for targeted docs and realistic exits — preparing the exact materials for your product reduces delays and shows readiness.
Typical Loan Terms, Rates, and Repayment Structures for California Hard Money Loans
Hard money economics center on LTV limits, interest rates, upfront points/fees, and short-term repayment expectations — often interest-only payments with a balloon at term end. LTV is calculated differently by program (purchase vs. ARV), and pricing reflects perceived risk: higher LTVs or weaker exits increase rates and reserve requirements. Interest rates are usually quoted as reference ranges for planning, and origination points or underwriting fees add upfront cost. Some programs advertise no prepayment penalties to support quick exits. The table below clarifies the main attributes and example values to simplify lender comparisons.
| Attribute | Explanation | Example / Value |
|---|---|---|
| LTV calculation | Choice of base (purchase, current, or ARV) affects maximum loan | 60% ARV typical for flips |
| Interest rates | Pricing for short-term risk and speed | Example: 8–12% reference range |
| Points / Fees | Upfront fees charged as a percentage of the loan | 1–4 points typical depending on program |
| Term & Repayment | Short terms, often interest-only with a balloon | 6–24 months typical |
| Prepayment policy | Penalties or none, depending on program | Some programs report no prepayment penalties |
These attributes show how lenders price risk and structure repayment; the next sections walk through LTV examples and common rate/fee practices.
How LTV Ratios Are Calculated and Used
LTV = proposed loan amount ÷ the valuation base the lender uses (purchase price, current value, or ARV). Lenders pick the base based on loan purpose. For a purchase loan, LTV is loan ÷ purchase price; for rehab lending underwritten to ARV, lenders consider a percentage of projected ARV less the rehab budget, so both loan‑to‑cost and loan‑to‑ARV matter. Example: ARV $500,000 with $100,000 rehab; at 60% of ARV the loan max would be $300,000, which must cover purchase and rehab draws. Clear math and transparent budgets prevent surprises and speed approvals.
With LTV understood, borrowers can better evaluate rates, fees, and overall cost of capital.
Interest Rates, Fees, and Prepayment Policies
Interest and fees compensate lenders for short-term risk. Typical hard money rates fall within a planning range, and origination points or flat underwriting fees are common. Some programs offer no prepayment penalties — useful for quick exits — while others include yield maintenance or short lock-in periods. Always request a full fee schedule and a firm rate quote so you can compare offers accurately.
How California Borrowers Can Address Credit, Speed, and Property Eligibility Concerns
If you’re worried about credit, slow approvals, or property condition, take proactive steps: assemble a tight documentation packet, emphasize equity and exit plans, and provide contractor bids and comps to reduce valuation uncertainty. Equity-first underwriting lets many borrowers with credit issues qualify when the collateral and exit plan are strong; if credit is weak, additional liquidity, co-borrowers, or higher down payment can offset pricing impacts. Use a checklist and timeline to streamline underwriting and avoid surprises during appraisal or title review — preparing in advance is the best way to secure fast approvals and funding.
Below is a practical document checklist to accelerate approvals and a short set of urgency tactics for time-sensitive deals.
- Purchase contract, clear title report, and payoff statements when applicable.
- Recent bank statements, P&L or tax returns when applicable, and proof of down payment.
- Rehab scope, contractor bids, and an itemized budget with a simple timeline.
- Agent comps or broker price opinions supporting ARV or market value.
- One-page exit plan and clearly stated contingency options.
Having these materials ready avoids common delays; the next section addresses credit checks and how equity-first underwriting interacts with FICO scores.
Do Hard Money Lenders Run Credit Checks?
Many hard money lenders will check credit to gauge borrower reliability and price the loan, but credit rarely supersedes strong collateral and a solid exit plan when it comes to approval. If credit is weak, lenders typically compensate with higher rates, additional points, larger reserves, or reduced LTV. Acceptable credit issues can often be offset by substantial equity, multiple exit paths, or co-signers. Document sources of funds, explain credit events transparently, and strengthen your collateral package when credit is a concern. In practice, equity and a clear exit usually matter more than FICO when the underlying asset and plan are sound.
Knowing what accelerates funding with a given lender is essential; the following section outlines expected timelines with Fidelity Funding and what conditions enable the fastest funding.
How Quickly Can Fidelity Funding Approve and Fund Loans?
When documentation is complete, Fidelity Funding | Hard Money Loans states it can approve loans within 48 hours and fund in as little as 5–7 days for qualifying California deals. That timeline assumes clear title, a completed appraisal (or strong value evidence), proof of funds for any down payment or reserves, and contractor bids for rehab loans. Typical loan sizes range from $50,000 to $50,000,000, and some programs can reach high LTVs — up to 80–90% on select deals — with certain programs reportedly offering no prepayment penalties. For urgent transactions, prepare a one-page deal summary, include all required documents, and contact the team by phone to discuss submission.
- Submit a complete deal package with purchase contract, title, appraisal (if available), and contractor bids.
- Confirm funding capacity by documenting proof of down payment and reserves.
- Communicate timelines clearly and request conditional approvals or bridge funding where appropriate.
Following these steps aligns your readiness with lender requirements and improves the chance of rapid funding through private hard money programs.
Frequently Asked Questions
What property types qualify for hard money loans in California?
Hard money can fund residential, commercial, and investment properties. Lenders prioritize equity in the asset over borrower credit, so properties needing repair or facing foreclosure can still qualify if there’s sufficient collateral value. Specific eligibility varies by lender, so confirm requirements with each lender you consider.
How can borrowers improve approval odds for private money loans?
Build relationships with lenders and present clean, complete documentation: bank statements, P&L statements, tax returns, and a concise investment plan with exit strategy. Provide references and past project summaries to demonstrate experience. Clear, transparent communication about timelines and issues also builds trust.
How do private money interest rates compare with hard money rates?
Rates vary by lender, borrower profile, and deal risk. Hard money rates commonly fall in an 8%–12% planning range; private money can sometimes be priced more favorably for trusted, experienced borrowers. Always compare firm quotes from multiple lenders to understand true cost.
Are there prepayment penalties on hard money loans?
Prepayment policies differ by program. Some lenders offer loans without prepayment penalties, which helps borrowers who plan quick exits; others include penalties or short lock-in periods. Ask for a full fee schedule and prepayment terms before signing.
What documentation is required for a fix-and-flip loan?
Fix-and-flip loans typically require a detailed rehab budget, contractor bids, and comparable sales to support ARV. Lenders also want proof of funds for down payment and reserves and a clear exit strategy, such as a sales plan or refinance option. Organized documents speed approval.
How do hard money lenders value a property?
Lenders use appraisals, comparable sales, and condition assessments to determine value, with ARV used for rehab deals. Contractor bids and project plans help evaluate renovation feasibility. Providing comprehensive documentation increases the chance of a higher valuation and quicker approval.
Conclusion
Knowing the differences between hard money and private money helps California borrowers choose the right financing path. By understanding key qualifications and preparing focused documentation, you can streamline approvals and secure better terms for your investment. Whether speed or flexibility matters most, the right preparation and lender match empower you to move quickly and confidently. Explore our resources or contact our team to find the lending solution tailored to your situation.
