Many believe that it is hard to get a construction loan. In some cases, the assumption is correct but with the right information and tools, it is not hard as it is a matter of getting the right lender. Hard money lenders are increasingly becoming candidates for construction financing. However, you should be keen as some are after satisfying themselves. To get a private money construction loan, use these guidelines.
Present your lender with the potential value of your construction. Private money construction loan lenders finance based on the property’s collateral value, not personal credit score. That implies you will have to issue documents like architectural plans, detailed budgets for construction as well as your contractor quotations for renovations and repairs. Be ready to prove the value of your particular property and the neighborhood; research the value of properties like yours in this area, the history of demand in this neighborhood, and its projections for growth. Having this data will better your chances of getting approved. Also, prove your past success in real estate projects to your lender.
Consider loan size and affordability. It is crucial to figure out what financial commitment a construction loan will need on a monthly basis before moving on with the loan request. The cost of the loan is going to depend on the loan size as well as the rate. The rate will fluctuate depending on the size of down payment, the builder’s experience and capability to absorb potential cost overruns, and if the land is possessed free and clear.
Evaluate various financing options. With construction, it is normal to get short term loan of between 12 and 24 months and this lets you have sufficient time to finish the construction as well as market the property. These loans often need monthly interest-only payments. In case you are constructing a house for sale, this is a great alternative; however, in case you need to keep the property, you will require permanent financing to repay the construction loan. Some lenders avail a ‘one time close’ with the loan starting as a construction loan but after a specified time, it turns into a regular mortgage. This can be a suitable alternative when building a home you need to keep for personal use or as an investment. Most lenders will need the land to be clear and free before they approve a construction loan.
Interest reserve or interest-carry is a figure that a number of lenders to the amount of the loan to cater for monthly interest payments for a certain time or the life of a loan at times. These funds are advanced each month and added to the loan balance as a construction draw. These let the borrower to focus on the construction and not be bothered with the monthly payment role. Besides, it gives more security to the lender since they know they will be getting their monthly payments. Check Private Money Construction Loans Seattle to learn more.
In case you intend to hire a contractor to be in charge of the construction, this is the most crucial part of the equation. You need to verify their capabilities by showing construction they have completed in the near past. Talk to clients the contractor has worked for and ask for at least one hard money lender reference. Check Private Money Construction Loans Seattle to learn more