What is a hard money construction loan?
A hard money construction loan is a short-term loan used to finance the construction of real estate investment property. Hard money construction loans are often the most attractive option for seasoned investors who are looking to challenge themselves by building a home from the ground up or completing a tear-down and gut renovation of an existing structure instead of average fix and flip.
Benefits of a hard money construction loan?
With most hard money loans, the loan amount is based on the as-is house or lot value combined with repair or construction costs. An additional benefit of a hard money construction loan is that there is no minimum credit score. However, keep in mind that unlike hard money fix and flip loans, experience is essential for a new construction loan! Hard money lenders fund up to 60% of the land value and 100% of the construction budget, capped at 60% of the ARV. With interest rates from 10% to 12%, points ranging 2% to 3% and a loan term up to 18 months, seasoned investors rely on construction loans like these for finance their business. Hard money lenders closed loans in as little as 48 hours, and have an average close time of 10 days, unlike a conventional loan which takes a minimum of 60 days to close.
How to get a hard money construction loan?
The process of obtaining a hard money construction loan is much different than a conventional mortgage. Unlike a conventional loan, which requires lots of paperwork, a new hard money construction loan requires relatively light documentation. Once you have completed loan application for a hard money construction loan, the loan officer and underwriter will review the deal with you and order an appraisal if the deal fits. The underwriter will ask questions about your experience, as well as request copies of the construction plans and other relevant documentation. Hard money lenders will issue a written term sheet that outlines all the loan’s details. The loan then moves to processing where the few required documents are collected, and ultimately the loan is closed by an attorney.
The Bottom Line:
Real estate investing is a growth industry, and good deals move quickly. Seasoned investors know how crucial a quick close can be. Hard money construction loans are the faster and easier alternative for obtaining financing for the construction of a residential or commercial property and that’s why experienced real estate investors have relied on hard money loans as a source of quick and reliable capital to fund their real estate deals for decades.
If you are considering building a new home from the ground up and need new construction financing, please feel free to contact Magna Capital Group, Inc. today. We have all the resources and information to help you successfully navigate the complexities of new construction financing. We provide the quickest and most streamlined lending process in the business to maximize your investment portfolio.
Our goal is to help you manage your investment portfolio in the most efficient manner possible. Over the years we have helped thousands of our customers achieve maximum wealth with the least amount of hassle. We have a creative solution to your financing needs. For more information about our construction loan programs, Call us today at (310) 734 4044 or Email at firstname.lastname@example.org.