Brokers referring clients to hard money lenders know that every deal comes with risk. But what exactly do lenders look at when assessing a borrower and their project? Understanding risk assessment can help brokers set the right expectations, improve approval chances, and ultimately close more deals.

Hard money loans move fast, but that doesn’t mean lenders skip due diligence. Unlike traditional banks, they focus less on credit scores and income and more on property value and exit strategy.

Let’s have a look at how hard money lenders evaluate risk and what brokers can do to increase approvals.

1. Loan-to-Value (LTV) Ratio: The First Risk Indicator

The LTV ratio is one of the first things a lender checks. It shows how much of the property’s value is being borrowed.

? Most hard money lenders approve LTVs between 60%–75%.

? Lower LTVs = lower risk for the lender (more equity in the deal).

? Higher LTVs = higher risk (less borrower equity, more lender exposure).

? Broker Tip: If a client is close to the max LTV, suggest putting more money down to improve approval chances.

2. Property Type & Condition: Does the Collateral Hold Up?

Hard money loans are asset-based, meaning the property secures the loan. That’s why lenders evaluate:

✅ Property type: Single-family, multifamily, commercial, land, mixed-use
✅ Property condition: Move-in ready vs. heavy rehab needed
✅ Location: High-demand market vs. slow-moving area

? Turnkey or light rehab properties = lower risk
? Major fixer-uppers or land deals = higher risk

? Broker Tip: If a deal involves a distressed property, have a detailed rehab budget and contractor estimates ready to improve lender confidence.

3. Borrower Experience: First-Timer vs. Seasoned Investor

Lenders want to know if the borrower has the experience to pull off the project.

? First-time investors may face stricter terms or require lower LTVs.
? Experienced investors with multiple successful projects get more flexibility and better terms.
? Track record matters: More completed flips or rentals = lower risk.

? Broker Tip: If your client is new, partnering with an experienced investor or bringing in a co-borrower can increase approval chances.

4. Exit Strategy: How Will the Loan Be Paid Off?

Hard money loans are short-term, so lenders need to see a clear exit strategy.

✅ Fix-and-flip? Proof that rehab can be completed and the property can be sold at a profit.
✅ Buy-and-hold? Plan for long-term financing or rental income to pay off the loan.
✅ Refinance? Strong credit profile and debt-to-income ratio to qualify for a bank loan later.

? No clear exit strategy? Higher risk.
? Multiple exit options? Lower risk.

? Broker Tip: Have your client prepare a solid business plan showing timelines, budget, and contingency plans.

5. Market Conditions: How Will the Local Market Affect the Deal?

Lenders look at local real estate trends to assess the likelihood of a successful investment.

✅ High-demand markets = lower risk
✅ Slow-moving markets = higher risk

? If property values are rising, it’s easier for the borrower to sell or refinance.
? If inventory is high and demand is low, the lender may be more cautious.

? Broker Tip: Have local comparable sales (comps) ready to show market strength.

6. Borrower’s Financial Strength: Skin in the Game

Unlike banks, hard money lenders don’t focus on credit scores as much—but financial strength still matters.

? How much of their own money is in the deal? More = lower risk.
? Liquidity: Does the borrower have reserves for unexpected costs?
? Personal guarantees: Some lenders require them, others don’t.

? Broker Tip: If a borrower is low on cash, suggest raising private capital or partnering with a funding partner.

7. Rehab Budget & Project Feasibility

For fix-and-flip loans, lenders want to see a clear budget and timeline.

✅ Realistic rehab costs (not under-budgeted)
✅ Licensed contractor bids
✅ Permits (if needed) already secured

? Underestimated rehab costs = lender concern
? Missing permits or zoning issues = approval delays

? Broker Tip: Well-prepared rehab plans with detailed cost breakdowns speed up approvals.

8. Lender-Specific Criteria: Every Lender Has Different Risk Tolerance

Not all hard money lenders have the same risk appetite.

✅ Some specialize in fix-and-flips
✅ Some prefer longer-term rental loans
✅ Some avoid land or commercial properties

Brokers should know their lenders to match clients with the right fit.

? Broker Tip: Work with lenders who align with your clients’ strategies—not all lenders are the same.

Helping Clients Get Approved Faster

Risk assessment is the foundation of every hard money deal. Brokers who understand what lenders look for can position their clients for success.

? Match clients with the right lenders based on risk tolerance.
? Help borrowers present strong exit strategies and business plans.
? Ensure LTV, property type, and experience align with lender requirements.

At Lending Bee, we focus on fast approvals and reliable funding. If you’re a broker looking to place more deals with confidence, let’s talk.