“Faster Funding: The Key Advantage of Borrowing New Construction Loans from Hard Money Lenders
Building a house can be an exciting, but it can also be a challenging process. Finding the right funding source is a critical part of this process. For many builders, taking out a new construction loan from a hard money lender is the best way to get the financing they need. Here’s why:
One of the key advantages of borrowing new construction loans from hard money lenders is that they can provide faster funding. Traditional banks and financial institutions have a long and extensive loan approval process, which can take weeks, if not months, to complete. This can be a significant drawback when you’re trying to build a house on a tight timeline. Hard money lenders, on the other hand, are able to provide faster funding because they don’t do a deep dive into your personal financial condition, require tax returns, or have other lengthy underwriting procedures. Instead, they focus on the experience of the borrower and the collateral you provide, such as the property itself, to secure the loan.
Another advantage of borrowing new construction loans from hard money lenders is that they offer more flexibility in terms of loan structures and repayment terms. This allows you to get the financing you need in a way that works best for your particular situation, whether you’re looking for a short-term loan to fund construction or a longer-term loan to cover post-construction expenses. This can be especially helpful for borrowers who may have unique circumstances, such as unexpected changes in the construction timeline or unexpected expenses.
Oftentimes, hard money lenders are willing to offer builders higher leverage than a bank can when it comes to new construction loans. This can mean less investment on the part of the borrower, which allows them to have more capital on hand to keep the project moving. It can also mean that the borrower will have the ability to build more houses at once. Most lenders in the hard money space will lend 100% of construction, whereas banks might ask for the borrower to fund 10-20% of every construction draw.
When considering taking out a new construction loan from a hard money lender, it’s important to do your research and find a lender that is reputable and has a track record of providing quality loans. You should also consider the costs involved, including the interest rate and other fees, to make sure you’re getting a good deal. If you’re looking to build a new house on spec, consider taking out a loan from a hard money lender to get the financing you need. Just be sure to do your research, compare your options, and choose a lender that is reputable and offers a good deal.