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Checklist for Evaluating Hard Money Loan Proposals (2026)
By Jason Taken · Principal
Hard money loan comparison checklist for 2026 — LTC, ARV, points, draw schedule, extension policy, and lender red flags before you sign a term sheet.
Two term sheets can look similar on rate — and produce $15,000+ swings in net spread once you account for leverage caps, draw friction, extension cost, and hidden fees. Use this 2026 checklist before you commit to a hard money lender.
Pair it with red flags to avoid and model carry in the fix and flip calculator.
Pre-flight: is hard money the right product?
| Deal type | Hard money fit |
|---|---|
| Distressed acquisition + rehab | Yes |
| Auction without inspection | Yes |
| BRRRR buy/rehab phase | Yes |
| Stabilized 30-year hold | No — use DSCR |
| Owner-occupied | No — investment property only |
Product comparison: hard money vs conventional.
Checklist: lender credibility
- Track record — funded deals in your asset class (flip, BRRRR, multi)
- Transparent term sheet — rate, points, fees, extension policy in writing
- Direct lender or broker — know who underwrites and funds
- Draw process documented — milestone schedule, inspection turnaround
- References — other investors in your market, not just website testimonials
- Licensed / compliant — entity registration and state disclosures where required
Proof of execution: case studies hub. Compare operators: Jaken Finance Group vs Kiavi.
Checklist: leverage and deal math
Hard money caps you at the lower of LTC and ARV — verify both:
| Metric | 2026 typical | Your term sheet |
|---|---|---|
| LTC | 85%–90% | _____ % |
| ARV cap | 70%–75% | _____ % |
| Rehab holdback | 100% of approved scope | $_____ |
| Initial advance | Purchase portion at close | $_____ |
- ARV supported by sold comps within 0.5–1 mile — not aspirational list prices
- Rehab budget matches line-item scope of work
- Down payment + liquidity reserve covers 3+ months IO carry
- Exit modeled with 7%–9% sale friction
Approval criteria context: demystifying hard money approval.
Checklist: rate, points, and fees
Do not compare rate alone. Build total cost at exit:
| Line item | Ask the lender |
|---|---|
| Interest rate | _____ % IO — on what balance? |
| Origination points | _____ % of loan amount |
| Underwriting / doc fee | $_____ |
| Appraisal | $_____ — who orders? |
| Draw inspection fee | $_____ per draw |
| Extension fee | _____ % or flat — how many months? |
| Default rate | _____ % if you miss maturity |
- All fees itemized on term sheet — no “TBD at closing”
- No large upfront fee before conditional approval
- Extension policy clear before you close — not negotiated under pressure
- Prepayment penalty none (standard on investor hard money)
Run numbers: fix and flip calculator.
Checklist: timeline and execution
| Milestone | Target (2026) | Lender commitment |
|---|---|---|
| Term sheet issued | 24–48 hrs on complete file | _____ |
| Conditional approval | 2–3 business days | _____ |
| Close | 7–14 business days | _____ |
| First draw turnaround | 3–5 business days post-inspection | _____ |
- Named contact with direct phone/email — not a ticket queue
- Conditions list provided upfront — application process
- Appraisal or BPO timeline stated in writing
- Draw process aligned with fix-and-flip draw guide
Checklist: loan terms and exit flexibility
- Term matches project timeline + 60–90 day sale buffer
- Interest-only — confirm no unexpected amortization
- Extension available — cost and notice period documented
- Guaranty scope — full recourse vs carve-outs understood
- Cross-default clauses reviewed if you hold multiple loans
- Exit path defined — sale, DSCR refi, or bridge
Side-by-side comparison template
Copy this table when comparing two or more proposals:
| Factor | Lender A | Lender B |
|---|---|---|
| LTC / ARV cap | ||
| Rate + points | ||
| Total fees at close | ||
| Rehab holdback | ||
| Close timeline | ||
| Extension cost | ||
| Draw inspection fee | ||
| Est. IO carry (project months) | ||
| Est. net spread after exit |
The lowest rate loses if leverage is 5% lower or draws lag three weeks behind your GC schedule.
Worked comparison: two term sheets on the same flip
Illustration only — the lenders, terms, and deal below are hypothetical. The math shows how to fill in the template above.
Deal: $250,000 purchase, $80,000 rehab ($330,000 total cost), $460,000 ARV, six-month hold, four draws.
| Term | Lender A | Lender B |
|---|---|---|
| Rate | 10.5% IO | 9.99% IO |
| Interest charged on | Drawn balance | Full loan amount from day one |
| Points | 2 | 3 |
| LTC | 85% | 90% |
| Doc / underwriting fee | $1,495 | $2,500 |
| Draw fee | $250 each | $350 each |
Step 1 — loan size. Both ARV caps (75% of $460,000 = $345,000) sit above cost-based leverage, so LTC binds. Lender A lends $280,500. Lender B lends $297,000.
Step 2 — six months of interest. Lender A holds back the $80,000 rehab and charges only on drawn funds. If draws come in evenly, the average balance is about $240,500. Interest is about $12,626. Lender B charges on the full $297,000, so interest is about $14,835.
Step 3 — points and fees.
| Cost | Lender A | Lender B |
|---|---|---|
| Interest (6 months) | $12,626 | $14,835 |
| Points | $5,610 | $8,910 |
| Doc fee + 4 draws | $2,495 | $3,900 |
| Total financing cost | $20,731 | $27,645 |
| Down payment at close | $49,500 | $33,000 |
Step 4 — profit and return. Assume an 8% cost of sale, so net proceeds are $423,200.
| Result | Lender A | Lender B |
|---|---|---|
| Profit after financing cost | ~$72,469 | ~$65,555 |
| Cash invested (down payment + financing cost) | ~$70,231 | ~$60,645 |
| Return on cash | ~103% | ~108% |
Lender B has the lower rate but costs $6,914 more. It still wins on return on cash because you put in $16,500 less up front. Which sheet is “better” depends on whether cash or total profit is your tighter limit.
Step 5 — the extension test. Now assume the sale slips three months. If Lender A charges 1 point to extend, the extra cost is about $2,805 plus $7,363 of interest. If Lender B charges 1.5 points, it is about $4,455 plus $7,418. Always rerun Step 4 with the extension case before you sign.
Benchmark the rate against today’s market
A term sheet is easier to judge next to public benchmarks. As of October 1, 2026:
- The bank prime rate was 7.00%, per FRED’s prime rate series.
- The overnight Secured Overnight Financing Rate (SOFR) was 3.87%, per FRED’s SOFR series.
- The average 30-year fixed mortgage was 7.28%, per Freddie Mac’s PMMS.
If a proposal floats at “prime plus” a margin, ask for the margin, the floor, and how often it resets. Example: prime plus 3.5% would be 10.5% today. A one-point rise in prime adds about $2,400 a year on a $240,000 average balance. Fixed-rate bridge terms remove that risk. Jaken Finance Group quotes fix-and-flip loans at 8.99%–13.5% interest-only on qualified files.
Legal checks: business-purpose rules and lender registration
Investor loans skip many consumer protections, so you have to read the documents yourself.
Truth in Lending usually does not apply. Regulation Z exempts credit “primarily for a business, commercial or agricultural purpose” and credit to non-natural persons such as LLCs, per 12 CFR 1026.3(a). The CFPB’s official commentary says credit to buy, improve, or maintain non-owner-occupied rental property is deemed business purpose. The owner cannot plan to stay there more than 14 days in the coming year. In practice, you will not get a standard Loan Estimate. Build your own cost table from the term sheet.
Watch for advance-fee scams. The FTC’s advance-fee loan guidance notes that real lenders can charge application or appraisal fees. But no legitimate lender says a fee guarantees a loan. The FTC also suggests checking whether the lender is registered with your state’s banking or financial regulator.
Questions that expose problems fast:
- Who is the lender of record on the note, and who funds at closing?
- Is any fee due before a written conditional approval? What is it for, and is it refundable?
- Does the rate apply to drawn funds or the full commitment?
- Is the default rate stated as a number, and when does it start?
- Is there a minimum-interest or exit fee even with no prepayment penalty?
Terms that hide in the loan documents
A term sheet is a summary. The note, mortgage, guaranty, and construction loan agreement control. Ask for drafts before closing and look for these clauses:
| Clause | What it does | What to ask |
|---|---|---|
| Interest reserve | Holds back part of the loan to pay your monthly interest | Is it optional, and do you pay interest on the reserve itself? |
| Draw retainage | Withholds a slice of each draw until completion | What percent, and when is it released? |
| Change-order approval | Requires lender sign-off before scope changes | How fast does the lender respond in writing? |
| Completion guaranty | Makes you personally liable for finishing the work | Does it end at certificate of occupancy or at payoff? |
| Insurance requirements | Sets builder’s risk, liability, and flood minimums | Can your current policy meet them, or do you need a new one? |
| Maturity and default triggers | Defines when default interest starts | Is there a grace period or a notice-and-cure right? |
Get answers in writing before the appraisal is ordered. Once you pay for third-party reports, walking away gets expensive. For a lender’s view of the approval steps, see the hard money loan application process.
After you choose a lender
- Submit complete file — contract, comps, scope, entity docs, liquidity
- Lock term sheet before appraisal spend where possible
- Track budget weekly — hard money mistakes to avoid
Next steps
- Pre-qualify — get a term sheet to run through this checklist
- Read 5 benefits of hard money
- Download the fix-and-flip financing ebook
Get a Term Sheet · What is a hard money loan · (833) 264-7776
Put a real term sheet through this checklist
Ask Jaken Finance Group for a written quote on your next flip, then score it in the side-by-side table above against any other offer you hold.
Submit scenario · Pre-qualify · (833) 264-7776.
Rates, terms and conditions offered only to qualified borrowers. Jaken Finance Group only finances non-owner occupied investment properties.