Category Archives: Construction Loans

Hard Money Loans For New Home Construction!

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Category : Construction Loans , Hard Money Loans

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 info@magnaloans.com.

Construction Financing: Five Tips for Getting a Construction Loan.

Category : Construction Loans

Here are five tips that will be helpful to broaden your knowledge of construction project
finance:
1. You need to know if the requested loan is within your budget and what the monthly
payment is going to be before you run out and buy land. Things to consider are the
following: what is your FICO score ( high or low), do you own land free and clear , do
you have experience, what exactly do you want to accomplish and how, how much
money do you have for a down payment. Construction loans are often ‘story loans’ so
make sure that your “story” is a well-told narrative of the situation;
2. It is good to be aware of your options for financing. You can get a short term 12 to 18-
month construction loan that you will have to refinance into a new conventional
mortgage loan once construction is completed. This approach has its pros and cons. On
the one hand, you will face two sets of closing costs going through the loan process
twice. But on the other hand, once the project is completed, you will have more
flexibility when shopping around for conventional mortgages. A popular construction
loan is the ‘one time close’ or construction to permanent loan. You will have one set of
fees and one closing;
3. Interest reserve is an estimated interest payment over construction period, which is
added to your loan amount. This is a tool created to benefit the client, so it will not be
necessary to make a monthly payment during construction period. However, because
the reserve is added on top of the loan amount, you will pay interest on the total
amount. You will need to make this decision:  whether you want the interest reserve to
be added or you just want to pay monthly interest payments out of your other business
proceeds.
4. Contingency funds are added to the loan amount just because construction projects
tend to have cost overruns. Banks normally add 5-10% of cost breakdown to the loan
amount. Again, it is your choice to agree on that or not;
5. It is crucial to know about possible options for interest rates.   Interest rate can be
locked until completion of construction or can be floating. Many lenders have higher
interest rates if you lock upfront.  Some lenders would not allow you to lock the interest
rate until the construction period is over. The other thing to consider is if the rate stays
the same after construction is finished and the loan is converted into a mortgage. You
need to make sure that choosing the floating interest rate will not cause you a problem
with monthly payments once rates will go up.

Finally, how do you find the right lender for your construction loan? One way to look for
construction financing is to go to every bank in town. Most of the time, you will not get
anywhere. If you do find a bank that will do a construction loan, they usually can offer
one product that may or may not be right for you. Magna Capital Group provides
different options to clients with construction loans for residential and commercial
construction projects.

Top 4 Things To Consider Before Starting A New Home Construction Project!

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Category : Construction Loans

Building own new home is one of the most exciting and rewarding projects for everyone, but it requires lots of time and money. Constructing a new home comes with the responsibility of making many important decisions including where you finance your loan, hiring a contractor, and more. Building a new home has many exciting advantages than buying an existing home, such as the ability to choose flooring, the exact kitchen cabinets, counter tops and even floor plan you want. The builder will work with you to customize the home before it’s completed.

If you’ve been thinking about building a new home, here are few healthful tips that you should consider before starting your construction project:

1. Careful Inspection Of The Property:
It’s important to do a careful inspection of the property before building your new home. Make sure the property has access to all necessary utilities and appropriate water and sewage services. Choose a lot/land that is well suited to the type of home you will build.

2. Choose The Right Home Builder:
Hiring the right contractor impacts the success of your project and your overall enjoyment of the building experience. Hiring a builder is like hiring any other type of professional. You may definitely want to work with someone who is highly qualified and experienced. Contract price and quality of construction can vary from contractor to contractor, so you are advised to take interview of several contractors in order to compare bids and then select the right contractor who makes you feel most comfortable.

3. Find A Reliable Lender:
It’s just like choosing the right contractor, selecting the right lender for financing your construction project is important. It can save your lots of time and money. Saving money on your financing allows you to put more money into your new home. Magna Capital Group, Inc offers competitive financing options that save you money. We help people build their dream homes. We make the process of getting a home construction loan as easy as possible for you and your contractor. Below are some exciting features of our home construction loans:

  • One application, one approval, and one closing—saving you time and money
  • Loans up to $5 million available
  • New home construction periods up to 12 months
  • And more!

4. Lower Building Costs With Sustainable And Clearance Materials:
Using recycled building materials can help you to save money and it’s completely Eco-friendly. Also, you can look for clearance products, such as floor models, reconditioned appliances, and discontinued models and products in order to lower your building costs.

The Bottom Line:

This article teaches you how to prepare for a new home construction project. Choosing the right contractor and lender can make your home construction project success and joyful.

Magna Capital Group, Inc. offers a number of construction loans designed to help you finance the building of your new home. If you are ready to start building your new home, Call us at (310) 734 4044 or email at info@magnaloans.com to learn more about home construction finance for your situation.

Tips to qualify for a Construction Loan

Category : Construction Loans , Home Loan

Banks and mortgage lenders are often leery of construction loans for many reasons. One major issue is that you need to place a lot of trust in the builder. The bank or lender is lending money for something that is to be constructed, with the assumption that it will have a certain value when it is finished.

 

  1. A Qualified Builder Must Be Involved. A qualified builder is a licensed general contractor with an established reputation for building quality homes. This means that you may have an especially hard time finding an institution to finance your project if you are intending to act as your own general contractor, or if you are involved in an owner/builder situation.
  2. The Lender Needs Detailed Specifications. This includes floor plans, as well as details about the materials that are going to be used in the home. Builders often put together a comprehensive list of all details (sometimes called the “blue book”); details generally include everything from ceiling heights to the type of home insulation to be used.
  3. The Home Value Must Be Estimated by an Appraiser. Although it can seem difficult to appraise something that doesn’t exist, the lender must have an appraiser consider the blue book and specs of the house, as well as the value of the land that the home is being built on. These calculations are then compared to other similar houses with similar locations, similar features, and similar size. These other houses are called “comps,” and an appraised value is determined based on the comps.
  4. You Will Need to Put Down a Large Down Payment. Typically, 20% is the minimum you need to put down for a construction loan – some lenders require as much as 25% down. This ensures that you are invested in the project and won’t just walk away if things go wrong. This also protects the bank or lender in case the house doesn’t turn out to be worth as much as they expected.

 

Five Simple Requirements Of Getting Hard Money Rehab Loans

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Category : Construction Loans , Fix & Flip Loans , Hard Money Loans , Hard Money Rehab Loans , private money lenders

A hard money rehab loan is a short-term financing option used by real estate investors to purchase and renovate investment properties. Hard money rehab loans allow investors to purchase homes in need of renovation and rehabilitation under terms that are more flexible than traditional, long-term mortgage loans. Rehab loans are issued as a percentage of a property’s expected after-repair-value (ARV). A property’s ARV is equal to the expected amount the property will sell for after all renovations are made.

Hard money rehab loans usually have a quick approval process, 06-12 months financing terms, and good interest rates between 7.5% – 12%. Hard money lenders offer rehab loans of up to 75% ARV and can get investors funded in as little as 10 days. Further, they fund the purchase and renovation of both single-family homes and multi-unit properties, as well as offer interest-only payments, making it a good option for rehab investors.

If you found the perfect Rehab or Flip Deal and can’t find a traditional bank to lend or approve the financing you need, hard money rehab loan would be the best option for you. You can utilize easy lending criteria and quick closing services of a hard money lender that will finance a rehab loan quickly than a traditional bank. Every hard money lender has a set of requirements to fund and close a rehab loan. Here are some of the basic information required by most hard money lenders:

1. Interior And Exterior Photos Of The Property
You will be asked to provide photos of the exterior and interior of the subject property. For external photos, it would be ideal to provide a front, rear, sides of the property, as well as street scenes. For the interior, a few images of the various room, units, property amenities and good to see images would be helpful. You can also provide extensive photos of the property areas that will be repaired, replaced or removed, digital copies and a walk-through video. The more pictures submitted, the better the chances of approval.

2. Bid For Repairs:
Hard money lenders will require written estimates in order to process rehab loan application. You can contact a local contractor, handyman or repair specialist and get written estimates. Also, if you plan on painting and doing the make-ready yourself – still get a bid for repairs to give to your potential hard money lender.

3. Purchase Agreement:
They will need to see a signed copy of the purchase contract, the title company, and special escrow funding instructions if any. A real estate purchase contract is a binding agreement between two or more parties for the purchase, exchange or other conveyance of real property. Showing them a copy of the contract you plan to use is still a smart move and will make your property report compete and legit.

4. Proof of Insurance (POI):
You will need to provide proof of insurance to your hard money lender. It’s a type of documentation that a person can provide to another individual proving that the person has valid insurance with an insurance company. You can contact your insurance agent and get a quote for liability and hazard insurance for your hard money lender. This will ensure that the lender will be repaid in the event of the severe act of vandalism or catastrophic loss that occurs.

5. Preliminary Title Report:

This document is a tricky one. Some hard money lenders prefer to work with the certain title company. If you have a preliminary title report or confirmation that there is not a clouded title share this information with your potential hard money lender, else you don’t need to purchase title insurance or a full certified report.

Each hard money lenders have their own unique set of requirements based on their lending area, property purchase price, commercial vs residential, and loan repayment terms, but they always like to work with well informed and serious real estate investors.

The Bottom Line:
Hard money rehab loans are great for the fix and flip projects and for buying rental properties that need a small repair work done. Hard money rehab loans offer real estate investors a short-term loan with interest-only payments, quick approval times, and facilitate both the purchase of a house and it’s rehab costs into a single loan.

If you are looking for hard money rehab loans, take a few minutes to read these basic requirements to get your real estate investment deals funded quickly. To apply now or to get more information on our hard money rehab lending programs, contact Magna Capital Group, Inc. today and speak with one of our expert representatives at (310) 734 4044 or email at info@magnaloans.com.

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    8730 Wilshire Blvd., Suite 410
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