An important part of getting your requests approved by a hard money lender is knowing what they are looking for so that you can send the right deals their way and present them with the right information about those deals. Here are three qualities that hard money lenders are looking for in a borrower that they decide to loan to:

1. Skin in the game. One of the first things that a hard money lender looks for in a borrower is someone willing to put up a large enough down-payment to provide assurance that they too stand to lose a good deal if the project goes into default. This is why typical hard money lenders offer lower loan-to-value (LTV) ratios than bank lenders. It also ensures that the loan will have enough equity to be paid off in foreclosure, if necessary. If you don’t have your own money to contribute to the deal, then you can either find another investor or partner to provide the funds for the down-payment or show that your contribution will be in the form of labor to renovate the property or perform other improvements. You just need to prove that you will also have something to lose.
2. Motivation to repay. In addition to your down-payment, a hard money lender is also interested in your exit strategy because they want you to repay your loan so that they can turn around and lend that money out again to another borrower rather than having it tied up in a foreclosed property for months or years.
3. Capability to repay. While bank lenders use your credit score to determine your ability to repay a loan, hard money lenders are much more likely to look at the income-producing potential of a rental property securing the loan or at the after-improvement value of a distressed property. Regardless of your credit score, what matters is that you show your lender that you have an exit strategy (see our previous blog on common exit strategies) and a plan to make your project profitable enough to repay your loan.

The bottom line is that hard money lenders want to be sure that they will get their money back. A hard money loan is a business transaction, and these lenders want to realize the expected return on their investment, not take possession of a property they don’t want to manage.