Overcoming Financial Challenges with Hard Money Loans for New Builds
Building a new house can be an exciting and rewarding experience, but it also presents its own set of financial challenges. Whether you’re an experienced builder or just starting out, securing the right financing is key to the success of your project. While traditional bank loans can be difficult to secure, hard money loans offer a flexible and efficient alternative for financing new builds. In this post, we’ll explore the benefits of hard money loans for new builds and how they can help you overcome financial challenges and achieve your investment goals.
Quick and Efficient Approval
One of the key benefits of hard money loans is their quick and efficient approval process. Unlike traditional bank loans, which can take weeks or even months to approve, hard money lenders can typically approve a loan in just a few days. This is particularly important for new build projects, where time is often a critical factor. With a hard money loan, you can get the financing you need quickly and get started on your project without delay.
Just like their loan approval process, hard money lenders can close very quickly. On average, hard money loans for new builds can close in 2 weeks. This means that the borrower can clear the site, put the foundation in, and often times be framing the house before a bank can close their loan. If you are timing the market or the seasons, this could mean everything to getting your project built on time and sold.
Fast Construction Draws
While lenders in the hard money space generally follow the same mechanics as a traditional lender, their process is much faster and requires less paper work. A bank may want an inspection, invoice support, a title update, and lien waivers. That process can take a couple weeks depending on the bank. A hard money lender may just need an inspection report, and 48hrs to review that report and wire the money into the borrower’s account.
Easier Qualifying Criteria
Hard money loans also have easier qualifying criteria compared to traditional loans. Typically, they won’t ask for extensive income documentation, personal financial statements, or tax returns. Most lenders in this space will want to make sure you have a minimum credit score and the appropriate amount of liquidity. Otherwise, they are just relying on the experience of the borrower to get the project completed and the value of the asset to repay the loan.
Experienced and Knowledgeable Lenders
When financing a new build project, it’s important to work with experienced and knowledgeable lenders. Hard money lenders specialize in short-term, high-interest loans, and they have a deep understanding of the real estate market and the construction process. They can provide valuable insight and guidance throughout the loan process, helping you navigate any financial challenges and achieve your new build investment goals.
In conclusion, hard money loans offer a flexible and efficient alternative for financing new builds. While their rates are higher than traditional bank sources, time value of money needs to be a factor when picking a financing source. In fact, you might actually save money paying a higher interest rate if it means you can complete the project faster and time the market better.