What Is a Hard Money Loan?
A hard money loan is a short-term, asset-based loan used primarily by real estate investors. Unlike traditional bank loans that scrutinize your income, credit history, and tax returns, hard money lenders focus on the value of the property being purchased or renovated — not your personal financial profile.
The term "hard money" refers to the fact that the loan is backed by a hard asset: real estate. This makes hard money loans uniquely suited to investors who move fast, have complex income structures, or need to close deals that conventional lenders won't touch.
Hard money loans are typically used for fix-and-flip projects, bridge financing, new construction, and DSCR rental transitions. They carry higher interest rates than conventional mortgages — usually starting at 7.5% in Texas — but they offer something banks can't: speed, flexibility, and certainty of closing. In a competitive real estate market, that's often worth far more than a lower rate.
For Texas real estate investors, hard money loans have become an indispensable tool. Whether you're buying a distressed property in Houston's Third Ward, flipping a home in Dallas's Oak Cliff, or bridging into a rental portfolio in Austin, a well-structured hard money loan can be the difference between landing a deal and losing it.
How Hard Money Loans Work in Texas
Hard money loans in Texas follow a simple, investor-friendly process. A private lender — like Kovah Capital — evaluates the deal based on the property's current value (or after-repair value for rehab deals) and lends a percentage of that value, typically up to 90% LTV for fix-and-flip projects.
Texas is a non-judicial foreclosure state, which means lenders can foreclose relatively quickly if a borrower defaults. This efficiency actually benefits borrowers: it reduces lender risk, which translates into faster approvals and more flexible terms for investors.
The underwriting process for a hard money loan in Texas is streamlined. Most lenders can pre-qualify you within 24 hours and close within 7–14 business days. You'll need to provide a purchase contract, property details, your renovation plan (for fix-and-flip), and a draw schedule. That's it — no bank statements, no W-2s, no tax returns.
Loan amounts typically range from $100,000 to $3 million for residential and small commercial properties. Texas law does require that hard money loans be for business purposes only — meaning the property cannot be your primary residence. This keeps the process simple and the lending standards investor-friendly.
Hard Money Loan Requirements in Texas
Hard money lenders in Texas underwrite the deal, not the borrower. Here's what matters:
- Property type: Single-family, multi-family (2–4 units), townhomes, and some commercial properties
- Loan-to-value (LTV): Up to 90% of purchase price on fix-and-flip, 80% on DSCR rentals
- After-repair value (ARV): The renovated value of the property, supported by a BPO or appraisal
- Rehab budget: A detailed scope of work with contractor bids or cost estimates
- Exit strategy: Either a sale (flip) or refinance into long-term financing (rental)
- Entity: Most lenders require borrowing in an LLC or corporation — not personally
While credit score isn't the primary factor, most lenders prefer a minimum 620 FICO. Your experience level can affect your rate and leverage — experienced investors with a track record often get better terms.
Hard Money Loan Rates & Terms in Texas
Here's what you can expect from Kovah Capital's hard money loan program in Texas:
| Parameter | Kovah Capital Terms |
|---|---|
| Interest Rate | Starting at 7.5% |
| Loan-to-Value (LTV) | Up to 90% |
| Loan Term | 12–24 months |
| Loan Amounts | $100,000 – $3,000,000 |
| Origination Points | 1–3 points |
| Close Time | 7–14 business days |
| Income Verification | Not required |
| Property Types | SFR, 2–4 units, townhomes |
Rates vary based on the deal's LTV, property condition, borrower experience, and loan size. Higher-leverage deals or first-time investors may be priced at the higher end of the range. The key is that your rate reflects the risk of the deal, not your personal income or employment history.
One important note: hard money loan interest is typically quoted as an annual rate but charged monthly. On a $300,000 loan at 8%, you'd pay $2,000/month in interest. For a 6-month flip, that's $12,000 in carry costs — a normal line item in your deal analysis.
How to Get a Hard Money Loan in Texas: Step by Step
Identify a property under contract — either a distressed property for a flip, or a rental to hold long-term.
Calculate ARV, rehab costs, MAO (Maximum Allowable Offer), and projected ROI. Make sure the deal works at the lender's terms.
Provide the purchase contract, property details, scope of work, and your exit strategy. No long forms — we keep it simple.
Receive a term sheet within 24 hours. Review the rate, LTV, points, and term. Ask questions — we're transparent.
We'll order a quick appraisal or BPO to confirm the property value. This typically takes 2–5 business days.
Sign docs at title, fund escrow, and get your keys. Most deals close in 7–14 days from application.
Top Uses for Hard Money Loans in Texas
- Fix & Flip: Buy distressed, renovate, sell at ARV. The most common hard money use case in Texas markets like Houston, Dallas, and San Antonio.
- Bridge Loans: Bridge the gap between buying a new property and selling an existing one — or between acquisition and permanent financing.
- DSCR Transition: Use a hard money loan to acquire and stabilize a rental, then refinance into a 30-year DSCR loan once it's leased.
- New Construction: Fund ground-up builds with progress draws. Kovah Capital offers construction loans for licensed GCs with approved plans.
- Distressed Acquisitions: REOs, tax sales, estate sales, and foreclosures often require fast cash closes that banks can't provide.
- Commercial Conversions: Converting retail or office space to residential — hard money bridges the gap during rehab.
Frequently Asked Questions
Apply for a Hard Money Loan in Texas
Kovah Capital funds fix & flip, DSCR, bridge, and construction loans across Texas. Close in 7–14 days. No income verification required.
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