Financing

Hard money lenders for properties with open permits

Getting hard money for a property with open permits can be tricky, but it's not impossible if you know what lenders are looking for. Focus on transparency and a clear plan to resolve the permit issues quickly to secure financing. This is not financial or legal advice.

October 21, 2026 · 3 min read

What an open permit means to a lender

An open permit signals potential risk to a hard money lender because it indicates work was done without final approval. This means the property might not be up to code, or the work could be incomplete or done incorrectly. Lenders are primarily concerned about their collateral and the ease of liquidating it if a deal goes sideways.

For example, suppose a property has an open plumbing permit. A lender will worry about hidden issues, the cost to bring it to code, and how long that will take. He or she wants to know that the property can be sold quickly and cleanly if he or she has to foreclose. An open permit adds uncertainty to that process, making the property less attractive. This is not financial or legal advice.

How to identify open permits before applying

Before you even think about hard money, pull the permit history for the property. You can usually do this online through the local county or city building department's website. Look for any permits that were issued but never closed out with a final inspection.

Sometimes, a permit might be old, from a previous owner, and forgotten. Other times, it might be recent work that just hasn't had the final sign-off. Knowing the status and age of each open permit will help you prepare your presentation to a lender.

Presenting your plan for permit resolution

The key to getting hard money for a property with open permits is to show the lender you have a solid plan. Do not hide the issue; address it head-on. Outline exactly what needs to be done to close each permit, who will do it, and how much it will cost.

Get bids from licensed contractors for the work required to close the permits. Present these estimates to the lender as part of your application. You should also have a realistic timeline for permit closure. This demonstrates you are organized and have a grasp on the situation, which reduces perceived risk for the lender. This is not financial or legal advice.

Impact on loan-to-value (LTV) and terms

An open permit can affect the lender's appraisal of the property and, consequently, the loan-to-value (LTV) he or she is willing to offer. The lender might factor in the cost of permit resolution into the property's current value or require a larger down payment.

You might also see slightly higher interest rates or additional fees to compensate the lender for the added risk. Be prepared for these adjustments and negotiate based on the strength of your resolution plan. For instance, a lender might hold back a portion of the loan until the permits are closed.

Alternative funding options if hard money is a no-go

If hard money lenders are unwilling to fund a property with extensive or complex open permits, consider other options. Private money lenders, especially those you have a direct relationship with, might be more flexible. They often focus more on your experience and the overall deal profitability rather than strict institutional guidelines.

For very short-term holds or assignments, transactional funding might be an option if the permits can be closed between the two closings. However, this is usually only for very minor issues. In some cases, you might need to resolve the permits yourself before seeking any financing, which requires upfront capital. This is not financial or legal advice.

Questions people ask

Will an open permit always kill a hard money deal?

No, an open permit won't always kill a deal. If the permit is minor, you have a clear plan to resolve it, and the costs are manageable, many hard money lenders will still consider funding. Transparency is key.

How fast do I need to close an open permit?

It depends on the lender and the severity of the permit. Some lenders might require permits to be closed before funding, while others might allow a reasonable timeframe post-closing, holding back funds until it's done. Always aim for the fastest possible resolution.

Can I get transactional funding with an open permit?

Transactional funding is typically for very short-term, back-to-back closings where title is clear. An open permit could complicate the title or make the property uninsurable, so it's less likely unless the permit is extremely minor and can be immediately resolved.