💰 Hard Money Loans Explained: When They Make Sense (and When They Don’t) 🏡

⚡ Hard Money vs. Non-QM: The Smart Way to Finance Owner-Occupied Homes 🏦

Hard Money Loans: When Do They Make Sense? And When to Use Non-QM Instead

Hard money loans have a reputation for being fast, flexible, and expensive — and all three are true. But the real question most buyers and investors should ask is this:

👉 When does a hard money loan actually make sense?
👉 And when should you pivot to a Non-QM loan instead — especially for owner-occupied properties?

At Medallion Funds, we guide borrowers through both options every week. Here’s how to think about them so you avoid overpaying or getting stuck with the wrong loan strategy.

What Is a Hard Money Loan? (Simple Definition)

A hard money loan is an asset-based real estate loan funded by private lenders.
Instead of focusing on credit score and income, they focus on:

·Property value

·Loan-to-value (LTV)

·Exit strategy

·Liquidity

These loans are known for:

✔ Lightning-fast closings
✔ Flexible underwriting
✔ Minimal documentation
✔ Funding deals banks won’t touch

But also:

⚠️ Higher rates (10–14%)
⚠️ Shorter terms (6–24 months)
⚠️ Higher fees

Hard money works exceptionally well — but only in the right scenarios.

When Hard Money Loans Make Sense

1. When Speed Is Everything

If you need to close in 5–10 days, no bank or traditional lender can compete with private capital.

Examples:

·Auction properties

·Distressed seller situations

·Assignments or wholesale flips

·Competitive investor offers

Speed creates leverage — and hard money wins here.

2. When the Property Won’t Qualify for Traditional Financing

Hard money is ideal for homes that need:

·Foundation repair

·Roof replacement

·Major plumbing or electrical work

·Extensive renovations

Or income properties with:

·Low occupancy

·Negative cash flow

·Incomplete leasable areas

Traditional lenders want “clean and stable.”
Hard money lenders fund “ugly but profitable.”

3. When Investors Need a Bridge to Stabilization

BRRRR investors use hard money strategically:

1.Buy

2.Rehab

3.Rent

4.Refi

5.Repeat

Hard money fills the gap between acquisition and refinance — as long as the numbers support the exit.

4. When Credit or Tax Returns Are Complicated

Hard money lenders focus on the collateral, not the borrower.

Good fit for:

·Self-employed buyers

·Investors with heavy write-offs

·Recent credit events

·Income that doesn’t fit DU/LP rules

In these cases, Non-QM may also work — but hard money closes significantly faster.

When You SHOULD NOT Use Hard Money

Everything has a place, but here’s when you want to avoid hard money:

❌ Owner-Occupied Residential Properties (Most Cases)

Hard money lenders avoid owner-occupied homes because they trigger consumer-protection compliance rules.

In these cases:

👉 Non-QM loans are the correct path.

Non-QM Loans: The Smarter Alternative for Owner-Occupied Borrowers

When a borrower needs a non-traditional loan to live in the property, Non-QM is almost always the better fit.

Why?

✔ Lower rates than hard money
✔ Longer terms (30-yr fixed options available)
✔ Credit + asset-based underwriting
✔ Bank-statement loans for self-employed
✔ No DTI requirement options
✔ Cash-flow-based loans for rentals

Use hard money for fix-and-flip or investor acquisitions.
Use Non-QM for any owner-occupied purchase or refinance.

Choosing the Right Strategy: Medallion Funds Approach

We help clients with both:

✔ Hard Money / Bridge Loans (Investors)

·Fix & flip

·BRRRR strategy

·Ground-up construction

·Commercial and mixed-use

·Fast closings

·Flexible underwriting

✔ Non-QM Loans (Owner-Occupied & Investor)

·Bank statement loans

·P&L-only loans

·Asset-qualifier

·DSCR

·1099 loans

·Self-employed

·Jumbo Non-QM

No matter the scenario, we match borrowers with the right product — not the most expensive one.

Final Takeaway

Hard money is powerful when used as a tool, not a default.
Non-QM is the upgrade for owner-occupied buyers who need flexibility without paying hard money rates.

If you’re unsure which direction your deal fits, that’s where we step in.

📲 Book a call with Medallion Funds — we’ll structure it the right way.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory