Hard money loans are an alternative for financing a house or investment property if you can't get approved for a traditional loan.

If poor credit is holding you back from taking advantage of real estate investing opportunities, even though you have plenty of capital or collateral, it’s time you discovered how to get a home loan with bad credit. The first step is to walk away from traditional lenders and seek alternative funding solutions.

Hard money loans could be just what you’re looking for, but what is a hard money loan? How does it work and why is it useful when buying a home with bad credit? Here are just a few things you should know if poor credit is stopping you from getting the loan you need.

Private Lenders

Traditional loans come from banks, most of which are hesitant to approve a bad credit mortgage because of the risk it entails. Hard money lenders are a different breed. They have no ties to banking institutions.

They are simply private investors looking for opportunities to make some money by lending their funds to others for the promise of repayment with interest. They don’t care so much about credit as long as you show them the money, so to speak.

Property Types

Hard money loans aren’t really intended for buyers seeking a primary residence. They’re aimed at real estate investors seeking to capitalize on property purchases such as rental units, house flips, or new construction. If you plan to purchase a property and sell it or start earning in short order, a hard money loan is right up your alley.


Loan-to-value (LTV) ratios are important in hard money lending. The amount of the loan is based on the value of the property. Generally, lenders will offer 65-75% of the property value, leaving borrowers to come up with the remaining 25-35% up front.

Borrower Requirements

Here comes the good news for anyone wondering how to get a mortgage with bad credit: hard money lenders are not as concerned with your creditworthiness as they are with the collateral involved. They want something else in exchange for loaning you funds.

First, you must have a sizeable down payment and proof that you can make payments on the loan. You also need to present a plan for the property.

Because hard money loans are short-term (generally 1-3 years), you’ll need to sell at a profit or earn profits on the property quickly in order to pay off the loan. If your credit is poor but you have cash, collateral, and a plan for your real estate purchase, a hard money loan could be just what you need to seal the deal.