How does a hard money loan work?

Here’s how a typical deal goes:

1. You bring a potential investment property to the lender.
2. The lender underwrites the deal—reviewing the purchase price, construction budget, and ARV using comps.
3. If approved, you’ll receive loan terms including down payment, rates, and structure.
4. Once agreed, the lender issues a Proof of Funds or Lender Letter to help you get the property under contract.
5. After the property is under contract, the lender gathers closing documents.
6. When the title is clear and documents are complete, you close on the property.
7. During the loan, you make interest-only payments each month.
8. If construction draws are included, funds are released in stages based on work completed on the property.
9. Once the project is finished and sold or refinanced, you repay the loan.

For more info, check out the How Hard Money Loans Work Infographic!