Can I get a hard money loan with bad credit?
Yes, most hard money lenders will make a loan with bad credit because they underwrite the property's equity and the exit first, typically requiring 30 to 40 percent equity and charging 11 to 14 percent when the score is under 620. What they will not ignore is a foreclosure or bankruptcy in the last one to two years, or an unresolved judgment that could attach to the property.
What bad credit changes
| Credit profile | Typical hard money treatment |
|---|---|
| 680 and up | Best leverage, 70 to 75 percent of value; best rate |
| 620 to 679 | Standard terms with most lenders |
| 580 to 619 | Leverage 60 to 65 percent; rate up 1 to 2 points |
| Under 580 | Fewer lenders; leverage 55 to 60 percent; rate up 2 to 3 points |
| Recent foreclosure or bankruptcy (under 12 to 24 months) | Many lenders decline; others require 40 percent equity |
| Open judgments or tax liens | Must be paid at closing or subordinated |
Ranges vary by lender.
Why the score matters less
A hard money loan is sized so the lender can sell the property and recover the balance if you default. The lower the score, the more equity the lender wants as cushion. Income and debt-to-income ratios are usually not calculated at all.
What still gets declined
- A foreclosure or bankruptcy within the lender's seasoning window, often 12 to 24 months.
- Judgments or liens that would take priority over the lender's lien.
- A pattern of mortgage defaults on investment properties.
- Fraud or misrepresentation on prior loans.
The exit is the real question
Hard money is short-term. If bad credit blocks the refinance, the exit has to be a sale. Plan for that: buy at a price that works as a flip, or use the hard money term to raise the score into DSCR range, usually 660 or better, before maturity. Paying down revolving balances during the hold is often enough.
Costs to expect
On a $300,000 loan at 13 percent with three points held nine months: about $29,000 in interest plus $9,000 in points. The premium over a good-credit borrower is roughly $2,000 to $5,000 over the term, which is usually cheaper than losing the deal.
A practical sequence
- Buy with hard money at 60 to 65 percent of value.
- Fix the credit during the hold: pay balances down, resolve collections, avoid new inquiries.
- Refinance into a DSCR loan once the middle score reaches the lender's floor.
- If the score will not recover in time, sell.
How CommFi handles it
Our lending desk reads the credit report and the property together and prices what is possible now. It funds direct when it fits, and when the file needs a lender that works with low scores or recent credit events, the desk searches a database of 7,000+ lenders and the ones that fit compete for it. Zero upfront fees.
Related reading
Related questions
- Is there a minimum credit score for hard money?
- Many lenders have none. Under 620, expect lower leverage and a higher rate; under 580, fewer lenders.
- Can I get hard money after a foreclosure?
- Often after 12 to 24 months, with more equity. Some lenders decline recent foreclosures entirely.
- Do hard money lenders check income?
- Rarely. They check the down payment, reserves for interest, and the exit.
- How do I get out of hard money with bad credit?
- Sell, or raise the score to about 660 during the term and refinance into a DSCR loan.
- Will bad credit raise my hard money rate?
- Typically one to three points, plus five to ten points less leverage.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.