How Long Does it Take a Hard Money Loan to Close?

Borrowers frequently turn to hard money lenders when in need of fast and flexible financing options. In many situations, a quick hard money loan may be the only way to rapidly secure the purchase of a property or pull equity from a piece of real estate. Hard money lenders understand they need to provide a fast closing to allow their clients to achieve their current objective.

How long does a hard money loan take to close? The answer will depend on the type of hard money loan needed, the circumstances of the loan and the borrower’s current position in the loan process.

How Long is Needed for Hard Money Loan Approval?

Depending on the specific situation, the hard money loan request can be approved within 5 minutes or it may take multiple days for more complicated loan scenarios. Generally, the hard money lender needs to quickly look into the subject property and conduct a fast review of the borrower’s application.

To speed up the approval process the borrower should complete the hard money loan application with as much relevant detail as possible and submit any documents requested by the lender as quickly as possible.

Once the loan request has been approved the hard money lender can proceed with the loan.  The time frames discussed in this article for closing a loan are general guidelines that can vary significantly depending on the actual loan scenario and the borrower’s circumstances.

The Hard Money Loan Closing Process: A Step-by-Step Guide

Understanding the hard money loan closing process helps borrowers prepare for a smooth and efficient transaction. Unlike traditional bank loans that can take 30-60 days, hard money loans can be funded at a much faster pace without compromising proper due diligence. The following overview describes the hard money loan funding process from application to funding.

Phase 1: Initial Application and Pre-Approval

• Submit loan application – Complete the hard money loan application with property information, borrower information, loan amount, and intended use of funds
• Provide initial documentation – Submit driver’s license, proof of funds for down payment (if applicable), accepted purchase contract (if applicable), and preliminary property details
• Initial property evaluation – Lender conducts preliminary review of property value, location, and loan-to-value ratio
• Credit and financial check – Quick review of borrower’s financial strength and credit (less strict than traditional loans)
• Receive initial approval – Hard money lenders can provide initial approval within hours of receipt of applications

Phase 2: Property Evaluation and Loan Terms

• Property inspection scheduling – Lender arranges for property walkthrough, desktop appraisal or obtaining photos of property
• Market analysis completion – Comparative market analysis (CMA) or broker price opinion (BPO) to establish property value
• Final loan terms – Lender provides detailed loan terms including interest rate, points, loan-to-value ratio, and repayment schedule

Phase 3: Documentation and Title Work

• Escrow/Title company selection – Choose escrow/title company to handle the closing process
• Preliminary title report ordering – Title company researches property ownership, liens, and encumbrances
• Loan disclosures – Lender provides initial loan disclosures to be reviewed and approved by the borrower
• Property insurance verification – Provide proof of adequate property insurance with lender named as additional insured/loss payee

Phase 4: Final Underwriting and Approval

• Complete underwriting review – Final verification of all loan conditions, property value, and borrower qualifications
• Title issue resolution – Address any liens, judgments, or title defects discovered in preliminary report
• Final loan approval – Lender issues clear-to-close once all conditions are satisfied
• Closing disclosure preparation – Required 3-day waiting period for consumer loans (business purpose loans may proceed immediately)

Phase 5: Closing and Funding

• Closing document preparation – Lender prepares deed of trust, promissory note, and lenders instructions
• Document signing appointment – Borrower signs all loan documents, typically with a mobile notary
• Final title search – Title company conducts last-minute search for any new liens or issues
• Fund disbursement – Lender wires funds to title company or escrow for distribution to all parties
• Document recording – Deed of trust and related documents recorded with county recorder’s office

Pro Tips for Fastest Closing

• Choose experienced hard money lenders with streamlined processes and dedicated underwriters
• Work with preferred title companies that understand hard money loan requirements
• Prepare all documentation in advance including recent bank statements and property information
• Maintain clear communication with all parties throughout the process
• Have backup plans for common issues like insurance or minor title problems

The key to a successful hard money loan closing is preparation and working with experienced professionals who understand the unique requirements of private lending. While the process moves quickly, attention to detail ensures smooth funding when you need it most.

Non-Consumer Hard Money Loans – Close in as few as 2-3 days

Non-consumer (often referred to as business purpose) hard money loans can be funded the fastest as they have the fewest amount of regulations. If escrow is already open and a preliminary report has been prepared the loan can be funded within 2-3 days.

If escrow needs to be opened and a preliminary report needs to be prepared it will likely take approximately 5-6 days to fund the loan.

Non-consumer loans will have the same funding timeline whether the real estate being used as collateral is an investment property or a primary residence. The use of the borrowed funds is one of the factors to determine if the loan is considered a non-consumer or consumer loan. The other factor is the ownership of the property. A borrower that is an entity is generally not going to be considered a consumer loan.

The type of real estate used as collateral is irrelevant in the determination of a non-consumer vs consumer purpose loan. It is possible that a loan against a commercial office building could be for a consumer purpose while a loan against an owner occupied primary residence could be a non-consumer (or business purpose) loan.

Consumer Purpose Hard Money Loans – Close in as few as 10 days

Consumer purpose loans cannot be closed as fast as non-consumer hard money loans due to the various government regulations. The first step is to provide the borrowers with the Loan Estimate document. After 7 business days the Closing Disclosure can then be provided to the borrower. After another 3 business days the final loan documents can be signed.

*If the property being used as collateral for the loan is currently owner occupied, there will be an additional 3 day waiting period after the loan documents are signed.

Consumer purpose loan determination: The majority of the funds loaned to an individual are intended to be used for personal, family or household purposes.

Factors and Situations Which Extend the Time to Close

– Preliminary report – If a preliminary report has not yet been ordered it may take a few days for the title company to prepare. Potential delay: 2-3 days

– Title issues – A preliminary report that comes back with any prior uninsured transfers will require time and effort from the title company to ensure the current owner of the property is able to encumber or transfer the real estate. Potential delay: 2-30+ days

– Clearing any liens or judgements – The discovery of any unknown liens or judgements can severely delay closing or even prevent the loan from closing at all. Liens and judgements will need to be paid off so the hard money loan can be recorded in the desired position. Potential delay: 1-30+ days

– Proof of Insurance – Proof of insurance for the property is necessary to close the loan. Potential delay: 1-2 days

– Pay off demands – If the subject property has existing loans that are being paid off with the new hard money loan, pay off demand requests must be submitted and received back from the lender prior to closing the loan. Potential delay: 1-5 days

– Overnighting documents to and from an out-of-town borrower – Potential delay: 1-2 days