Construction Loan Lenders

Construction loan lenders are available on the internet and also via the classical method of actually visiting a lender, sitting down and negotiating a loan. The former is the preferred method for those savvy borrowers interested in saving time and streamlining the process. In order to take advantage of going this route, there are websites providing software to enable borrowers to fill in all personal information for the desired loan. Then, this information is made secure so that only lenders can access the borrower applications at will. Doing business in this manner will ensure competition for the borrower's business. Not only can a person apply for construction loans, but for a variety of other types of lending instruments to suit almost any purpose. Sometimes a single visit to a website can provide access to hundreds of lending sources without having to visit numerous websites, thus taking up an enormous amount of time.

There are a variety of ways to structure a mortgage when working with construction loan lenders, and most are willing to take the time to listen and work with the client to achieve the desired outcome. Typical lending structures for construction involve the application, and then creating a permanent mortgage after the building has been completed. During the building process, portions of the funds are withdrawn on a monthly basis, and these are termed as "draws". Also, the rate of interest on these instruments is quite a bit higher than regular mortgages, and the builders are charged a fee on top of that. Some lenders only provide money for certain types of projects such as the construction of mobile home parks, or for commercial buildings and apartments. Check to make sure the proper source has been obtained before venturing into the process of providing personal information.

Construction loan lenders do not necessarily have to be banks. There are private resources available that are waiting for a good project to come along to fund. These investors may be willing to take more risk than banks will, and therefore the money may be easier to obtain. The proper term to refer to this type of funding is called a hard money transaction. Also, better terms may be available by going this route, so the time will be well spent investigating this avenue of funding. These private investors may require some type of collateral such as land or an existing house to secure the loan. "Say not thou, I will recompense evil; but wait on the Lord, and he shall save thee" (Proverbs 20:22 KJV).

When negotiating with construction loan lenders, the borrower will be able to lock in the interest rate when the time comes to borrow the money. Also the builder should consider any change orders that may take place throughout the build, and the cost of these change orders should be added on to the loan. For example, a typical amount to add would be approximately 10% over the desired amount to take into account unforeseen problems. Another consideration construction loan lenders may present will be how much the new buildings will be worth once the project has been completed. Therefore, some calculations will be performed to discover the answer to this question. The result should be at or larger than 1.25. If the number is smaller than this, there will probably be too much risk involved and the deal may not go through. The lender will most likely also consider the borrower's worth which should be as much, if not more, than the amount of funding desired.

Construction loan lenders will need to find out what type of financing the client desires. For example, will the term be for one year, nine months or six months? It is rare for a construction lender to provide financing for longer than one year, but it has been done. Finally, there will be the need for the borrower to provide detailed plans to the financier so that a total picture of all costs can be obtained and considered. Some construction loan lenders will allow the borrower to base the transaction on securities the borrower owns such as Self-directed Roth IRA's and 401(k) monies. IRA's are popular with those buying into franchises and the process is relatively quick from application to final construction. Most lenders today expect borrowers to risk more of their own money due to the recent credit problems in the USA today. Banks have large amounts of houses to auction due to owners defaulting on mortgages, and this becomes a liability for them. Commercial mortgages are now more similar to traditional financing regarding requirements to be met. Therefore, more caution is being exercised when granting mortgages for commercial construction purposes.

Finally, for those borrowers who are not employed on a regular basis, and for those who have difficulty producing enough financial documentation in order to secure a loan, then there are construction loan lenders who can arrange to provide what is termed a no doc loan. These loans however will only be given to borrowers who have good credit. Since there is little documentation to support lending the money, the lender will most likely require a higher interest rate by the borrower. Be prepared, however, to prove income through producing tax documents as far back as two years. Also, the savvy borrower should be sure to perform due diligence and shop lenders extensively to be sure a good deal is obtained. Much of this can be done over the internet, and there may even be some lenders willing to do this type of loan in this manner.

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