A hard money pre-approval letter is a signed document from a private lender confirming it has reviewed your finances and is prepared to fund real estate deals up to a stated amount. Most hard money lenders issue one within 24 to 48 hours after you submit bank statements, entity paperwork, and ID. The letter is not tied to a specific property, so you can attach it to multiple offers until it expires, usually 30 to 60 days after issuance.
What You Need to Submit
The paperwork is lighter than what a bank asks for, but lenders still need enough to underwrite your risk. Gather these before you start the application:
- Two months of recent bank statements showing enough cash to cover your down payment and closing costs. Hard money lenders generally require 20% to 35% down based on the property’s current value or its projected after-repair value.
- Entity documents. Hard money loans are structured as business-purpose transactions, so most lenders require you to borrow through an LLC or corporation. You’ll need your Articles of Organization or Articles of Incorporation, plus the operating agreement or bylaws showing ownership and signing authority.
- A government-issued ID, your Social Security Number, and your entity’s Employer Identification Number.
- A short summary of your investment experience, listing property addresses and sale dates from the past two or three years. First-time investors aren’t automatically disqualified, but a track record often earns better rates and higher leverage.
If you already have a property under contract, the lender will also want the purchase price, a line-item renovation budget, and your estimated after-repair value. Renovation budgets should include a contingency reserve, which lenders commonly set at 10% to 20% of project cost.
Organize everything as clearly labeled PDFs and confirm that your bank statement balances match the liquidity you claim on the application. Inconsistencies are the most common reason underwriters stop and ask for more documentation.
How Long It Takes and What the Lender Checks
Most private lenders handle pre-approval online. You upload documents through a secure portal or submit them by encrypted email, and the underwriting team cross-references your bank statements against the liquidity you declared.
A credit check is part of the process. Some lenders run a soft pull that doesn’t affect your score; others perform a full hard inquiry. Ask before you apply, especially if you’re shopping multiple lenders. Credit is a secondary factor either way. Many hard money lenders have no minimum credit score, and the ones that do set the floor far lower than any bank. The lender is mostly confirming there are no catastrophic red flags like active bankruptcies or fraud judgments.
Expect a public record search for outstanding tax liens, open judgments, or pending litigation against you or your entity. These don’t necessarily kill the deal, but they can affect your terms or require resolution before closing. A loan officer will usually call to walk through your investment strategy and the types of properties you’re targeting. The lender is evaluating whether your plan makes sense and whether you understand the local market.
From document submission to letter in hand, the whole process typically runs 24 to 48 hours. The letter arrives as a PDF, ready to attach to offers. If your finances change materially after issuance, tell the lender. Submitting an outdated letter and then failing to close damages your reputation with both the seller and the lender.
What the Letter Should Say
A finished pre-approval letter is usually one page. Before you start sending it out, confirm it contains:
- The maximum loan amount the lender is willing to fund, which sets the upper bound of your bidding range.
- Loan-to-value parameters. Hard money lenders commonly cap exposure at 65% to 80% of a property’s after-repair value, depending on the lender and the borrower’s experience. Some letters express the cap as a percentage of as-is value instead, so check which metric yours uses.
- An interest rate or rate range. First-position hard money loans currently run roughly 9.5% to 12%, with second-position loans higher. Your actual rate depends on your track record, the property type, and how much equity you bring to the deal.
- Loan term. Most hard money bridge loans run 12 months to 3 years.
- Expiration date, usually 30 to 60 days from issuance. After that, the lender needs updated financials before reissuing.
- A signature from a loan officer or principal of the lending firm. An unsigned letter from an unknown lender won’t impress a listing agent.
Some letters also include proof-of-funds language confirming the lender has verified your liquidity and is prepared to deploy capital once a specific property clears title review. In hard money, lenders often use “pre-approval letter” and “proof of funds letter” interchangeably. Some listing agents ask specifically for one or the other, so having both ready removes any ambiguity.
What It Costs You Later
Getting the letter itself is usually free. The costs hit once you move forward on a deal, and they’re worth understanding before you start making offers against the ceiling your letter sets.
- Origination points of 1.5 to 3 at closing, where each point equals 1% of the loan amount. On a $400,000 loan, that’s $6,000 to $12,000 in origination fees alone.
- Interest payments at current rates in the 9.5% to 12% range for first-position loans. On a $300,000 loan at 11%, carrying costs run roughly $2,750 per month in interest.
- An appraisal, typically $300 to $1,000 for a residential investment property.
- Prepayment penalties. Many short-term bridge loans include a guaranteed interest clause requiring a minimum number of months of interest regardless of when you pay off. Three months is common. Longer-term hard money loans sometimes use a sliding scale that decreases each year.
- Entity formation fees of roughly $70 to $300 depending on the state, if you don’t already have an LLC.
On a 12-month fix-and-flip financed at 80% LTV, total borrowing cost including interest, points, and fees can reach 15% to 20% of the loan amount. The pre-approval letter tells you what you can borrow, not what you should.
When Hard Money Isn’t the Right Fit
Hard money loans are classified as business-purpose credit, which is why your lender requires you to borrow through an LLC or corporation. Credit extended for business or commercial purposes is exempt from the disclosure requirements of the Truth in Lending Act, and credit extended to entities is exempt regardless of purpose.1eCFR. 12 CFR 1026.3 – Exempt Transactions
Credit for a non-owner-occupied rental property is automatically treated as business-purpose credit.2Consumer Financial Protection Bureau. Comment for 1026.3 – Exempt Transactions If you occupy the property for more than 14 days in a year, the loan may lose that classification and trigger consumer lending requirements retroactively. Most hard money lenders prohibit owner-occupancy outright in their loan agreements. If you need financing for a primary residence, hard money is the wrong tool and you shouldn’t be requesting a pre-approval letter for one.
Making the Letter Work in an Offer
Attach the letter to every written offer, even when you think the seller won’t ask. Listing agents use financing documentation to rank competing bids, and offers without it often get set aside without a second look. If you’re dealing directly with a motivated seller who has no agent, the letter signals you’re a serious buyer who can actually close.
Match the letter to the deal size. If your pre-approval is for $500,000 and you’re offering $200,000 on a distressed property, some sellers wonder why. Ask your lender for a version reflecting a range closer to your target acquisition price. Most will issue multiple versions at no additional cost.
Watch the expiration date. Submitting an expired letter is worse than submitting no letter, because it signals disorganization. If you’re actively making offers, request a refreshed letter before the old one lapses, and set a calendar reminder a week before expiration.
The letter proves you can close quickly with committed capital. It doesn’t guarantee funding on any particular property. The lender will still underwrite the specific deal before releasing funds, including a property appraisal and title review. In competitive markets where cash offers dominate, the pre-approval letter is the closest thing a leveraged investor has to competing on equal footing.