Hard Money Lenders Virginia: Short-Term Loans Explained

Published on July 12th, 2024
11 min read

Kelsey Morrison Former HomeLight Editor
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Kelsey Morrison Former HomeLight Editor

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Kelsey Morrison worked as an editor for HomeLight's Resource Centers. She has seven years of editorial experience in the real estate and lifestyle spaces. She previously worked as a commerce editor for World of Good Brands (eHow.com and Cuteness.com) and as an associate editor for Livabl.com. Kelsey holds a bachelor’s degree in Journalism from Concordia University in Montreal, Quebec, and lives in a small mountain town in Southern California.

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Are you planning your next real estate investment in Virginia and considering a hard money loan? Whether you’re eyeing a fixer-upper in Richmond’s historic districts or a commercial property in Roanoke, hard money lenders offer the quick and flexible financing solutions you need. Hard money loans are particularly beneficial for those dealing with tight schedules, less-than-perfect credit, or unconventional projects.

Even if you’re not an investor but need financial support to bridge the gap between buying a new home and selling your current one, we’ve got you covered. This article will explore the ins and outs of hard money lending in Virginia, offering valuable insights to help you determine if this option is the right fit for your real estate ventures or personal home-buying needs.

What is a hard money lender?

Hard money lenders are private individuals or companies offering short-term, asset-based loans secured by real estate. Unlike traditional lenders, who focus their attention on a borrower’s credit score and income, hard money lenders emphasize the property’s value. They commonly work with real estate investors like house flippers and buyers of rental properties who need fast funding and adaptable terms.

These lenders determine loan amounts using the after-repair value (ARV), which is the property’s estimated value after all renovations are completed. They typically lend a percentage of the ARV to reduce risk and ensure they see a return on their investment. Hard money loans carry higher interest rates, often between 8% and 15%, and short repayment periods, usually 6 to 24 months. Borrowers may also encounter origination fees, closing costs, and points. If the loan isn’t repaid, the lender has the right to foreclose on the property to recover their funds.

How does a hard money loan work?

For real estate investors in Virginia, hard money loans offer a fast and flexible financing option. Here’s a quick rundown of how these loans work:

Short-term loan: Hard money loans usually have repayment periods ranging from 6 to 24 months, unlike the longer 15- or 30-year terms of conventional mortgages.
Faster funding option: These loans can be approved and funded within days, compared to the 30 to 50 days typical for traditional mortgage loans.
Less focus on creditworthiness: Approval is based more on the property’s value than the borrower’s credit score.
More focus on property value: The loan amount is determined by the loan-to-value ratio of the property used as collateral.
Not traditional lenders: Hard money lenders are usually private investors or specialized lending firms rather than traditional banks.
Loan denial option: These loans are often sought by borrowers with poor credit who have been denied traditional mortgages but have significant home equity.
Higher interest rates: Due to higher risks, hard money loans typically come with higher interest rates than conventional loans.
Might require larger down payments: Borrowers might need to provide a larger down payment, often between 20%–30%, depending on the loan specifics.
More flexibility: Hard money lenders can offer flexible terms, including varying debt-to-income requirements and credit score criteria.
Potential for interest-only payments: Some hard money loans allow for interest-only or deferred payments initially, providing additional flexibility for borrowers.

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What are hard money loans used for?

In Virginia’s fast-paced real estate market, hard money loans provide quick and flexible funding to meet specific financing needs. Here are some common scenarios where these loans are especially helpful:

Flipping a house: Virginia investors involved in flipping homes benefit from the fast funding hard money loans offer. This allows them to purchase properties, complete necessary renovations, and sell for profit in a short timeframe.

Buying an investment rental property: Those looking to invest in rental properties can use hard money loans to quickly acquire and renovate properties. This allows them to start generating rental income sooner than with traditional loans.

Purchasing commercial real estate: Hard money loans are great for buying commercial real estate because they offer flexible terms and quick approvals. This is crucial in competitive markets where acting fast is key to securing valuable investments.

Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit scores can access financing through hard money loans. These loans are based on the property’s value rather than the borrower’s creditworthiness.

Homeowners facing foreclosure: Homeowners at risk of foreclosure can use hard money loans to refinance their debts or delay foreclosure, providing an opportunity to sell their property and avoid credit damage.

How much do hard money loans cost?

The cost of hard money loans is generally higher than traditional loans due to the added risk and convenience. Here are some of the typical costs involved:

Interest rates: These can range from 8% to 15%, depending on the lender’s risk assessment.
Origination fees: Lenders may charge 1% to 5% of the total loan amount.
Closing costs: These include legal fees, appraisal fees, and other administrative costs.
Points: Lenders might charge points, a percentage of the loan amount, upfront, which can add to the initial cost of obtaining a loan.

You can use online calculators to estimate these costs.

Alternatives to working with hard money lenders

If you need to leverage your home’s equity but want to avoid a hard money loan, consider these alternatives:

Take out a second mortgage: A home equity loan or HELOC can provide the necessary funds at a lower interest rate than hard money loans if you have sufficient home equity.

Cash-out refinance: This option allows you to refinance your existing mortgage, pulling out cash for new investments, often at more favorable interest rates.

Borrow from family or friends: Loans from family or friends can come with more flexible repayment terms and potentially no interest, making them more cost-effective.

Use a government-backed loan program: Programs like those from the FHA, VA, or USDA can help with home purchases through lower down payments and reduced interest rates.

Peer-to-peer loans: These loans, available via online platforms, are provided by individual investors and often have different terms compared to hard money loans.

Specialized loan programs: Consider specialized financing options for fixer-uppers or refinancing investment properties if you want to replace an existing hard money loan.

Request a seller financing option: Sellers may occasionally offer to finance the purchase themselves, leading to lower closing costs and less strict eligibility requirements.

How to buy before you sell

Finding the perfect home can happen when you least expect it. Maybe it’s a private 10-acre estate in Fredericksburg or an oceanfront condo in Virginia Beach. If you’re a Virginia homeowner aiming to buy a new home before selling your current one, HomeLight’s Buy Before You Sell program is designed to make the process smoother.

With HomeLight’s Buy Before You Sell program, you can leverage the equity in your existing home to make a strong, non-contingent offer on a new property. If your home qualifies, you can get an equity unlock amount approved within 24 hours without any cost or commitment. Once approved, you can confidently buy your next home and then sell your current one, avoiding the stress of moving twice.

Here’s how HomeLight Buy Before You Sell works:

The program charges a flat fee of 2.4% of your current home’s sold price. However, the potential savings in other areas, such as moving expenses, temporary housing, and the purchase price of your new home, might outweigh this cost. Plus, HomeLight’s BBYS fees are typically lower than bridge loan interest rates, which fall between 9.5% to 12%.

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3 top hard money lenders in Virginia

Traditional lenders might not always meet the needs of every real estate investment. If you have to move quickly to take advantage of a valuable opportunity, consider partnering with one of these top-rated hard money lenders in Virginia.

LendingDeck

Based in Richmond, LendingDeck caters to real estate investors by offering both short-term fix-and-flip loans and long-term rental financing. Their loans can be used to purchase or refinance non-owner-occupied residential properties, complete renovation projects, or finance long-term rentals. The company’s loan programs are available in 42 states, including Virginia. Fix-and-flip and rental loans can typically close in 15–20 business days once all documentation has been submitted. Rates start at 9.99% for fix-and-flip loans and 7.00% for rental loans.

Lending clientele: Residential real estate investors

Loan criteria: Up to 90% LTV (fix-and-flip), up to 80% LTV (rental)

LendingDeck has a Google rating of 4.9 stars based on more than 30 reviews. They are also accredited by the Better Business Bureau (BBB) and hold an A+ rating. Customers highlight their professionalism, responsiveness, and competitive rates. “I was highly impressed with how great this whole process went,” shared a client. “Andrew and his team were very professional throughout this whole process. They communicated with me in a timely manner and made sure I had everything needed to get approved for my loan.”

lendingdeck.com

800-547-9080

Washington Capital Partners

Founded in 2012, Washington Capital Partners is a hard money lender based in McLean. The company offers eight different loan programs, including acquisition-only, fix-and-flip, rental, cash-out refinancing, bridge financing, loan refinancing, transactional funding, and new construction. They lend in 10 states, including Virginia, in addition to Washington, D.C. LendingDeck simplifies the closing process by requiring minimal documentation and offering a lightning-fast underwriting process.

Lending clientele: Real estate investors and developers

Loan criteria: Up to up to 70% LTV (fix-and-flip), up to 80% LTV (rental), up to 75% LTC (new construction)

Washington Capital Partners is BBB-accredited with an A+ rating and has a Google rating of 4.6 stars based on more than 70 reviews. Customers praise their exceptional customer service, professionalism, and reliability. “My partner and I recently started our own flipping business with minimum experience,” wrote one reviewer. “Max Van Vleet and Grant Sears have been just spectacular! With their endless support, we easily were able to get a loan for our first flip.”

washingtoncapitalpartners.com

703-348-0549

Friendly Rehab Funds

Friendly Rehab Funds, based in Virginia, offers hard money loans to real estate investors and property owners in the Greater Richmond Area, Fredericksburg, Charlottesville, Virginia Beach, and Williamsburg. Eligible properties include single-family residential, multi-family residential, and commercial. They provide fast, flexible private financing to new and experienced investors and can typically close loans within five days. Loan terms are generally nine months, with a potential three-month extension for borrowers in good standing.

Lending clientele: Real estate investors

Loan criteria: Typically, 65%–70% ARV

Although Friendly Rehab Funds is not BBB-accredited, the company maintains an A+ rating. They also have a 3.5-star rating on Google based on a limited number of reviews. Positive reviews mention the team’s speed, low rates, and expert advice. “In my experience, Friendly’s draw process was faster than other lenders,” reads a recent review. “This is a big help to get my crews paid quickly and onto the next project.”

friendlyrehabfunds.com

804-593-5100

Should I partner with a hard money lender in Virginia?

Deciding whether a hard money loan is right for you in Virginia depends on your specific real estate goals and circumstances. Hard money loans are best suited for real estate investors who need fast funding for projects with quick turnarounds or when traditional financing isn’t feasible. If you can handle higher costs and shorter repayment terms for the sake of flexible, rapid financing, a hard money lender in Virginia could be your solution.

For homeowners looking to leverage their equity, HomeLight’s Buy Before You Sell program offers a viable alternative. Instead of facing high interest rates, you’ll pay a flat fee and benefit from a stronger, non-contingent offer on your next home, making your move smoother and more cost-effective.

Consider your long-term financial strategy and consult with a financial advisor to ensure it aligns with your investment goals. For those seeking expert guidance, HomeLight can connect you with top real estate professionals in Virginia who understand the local market and have access to trusted hard money lenders.

Header Image Source: (Ismael Paramo / Unsplash)

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At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.

Kelsey Morrison

Former HomeLight Editor

Kelsey Morrison worked as an editor for HomeLight's Resource Centers. She has seven years of editorial experience in the real estate and lifestyle spaces. She previously worked as a commerce editor for World of Good Brands (eHow.com and Cuteness.com) and as an associate editor for Livabl.com. Kelsey holds a bachelor’s degree in Journalism from Concordia University in Montreal, Quebec, and lives in a small mountain town in Southern California.