Is a traditional house building loan, with a hefty down payment and a high-interest rate, the only way forward? The simple answer is no! While a conventional construction loan is a good choice in several situations, you still have other profitable ways, like hard money loans, to pay the bill. In today’s article, our Real Estate Funding Solutions team will compare hard money loans with traditional ground-up financing to help you decide which house building loan option fits your needs the best.
If you are building your primary residence, you must know that there are other options than a traditional construction loan. If you have been working towards your ground-up construction project to live in or use as your family vacation home, you might wonder, “What’s the most profitable way to finance the project?”
What Are Hard Money Loans for Construction
Instead of your credit score, income, and the cash you have on hand for your down payment, a hard money loan will focus on your assets. With this house building loan, the real estate you purchase will also be collateral. If you default, the structure/land will go to your lender.
A hard money lender is comfortable giving you the loan because they know in case something happens, the property will cover it. It’s a profitable house building loan for retirees who generally have minimal income but a lot of other financial resources. You may have difficulty qualifying for a hard money loan if you don’t own any significant assets.
Hard money loans are available only via private money lenders, generally business entities but sometimes individuals. Hard money loans’ interest rates are ideally high and come with short repayment terms. Hard money loans come with the highest rates and can be anywhere from 7% to 10%. However, these loans offer you a quick turnaround. You can quickly get your hard money loan approved within five days.
Traditional Ground-Up Construction Financing
When we hear the term “loan,” traditional financing is the first thing most people think about. Financial institutions like Banks generally offer this kind of financing to all qualifying borrowers. These loans are usually based on various criteria, including income, credit score, down payment, and several other debt obligations. However, getting this kind of financing can be challenging since the qualifying criteria for traditional loans can be a little stringent.
Why Should You Consider Hard Money Loans?
Let’s look at the top three reasons you may want to select hard money loans over traditional ground-up construction loans for your next project.
Unlike a conventional lender, hard money lenders can easily fund your construction project within days instead of months. If you are hoping to buy land sought after by many people, you will need fast funding to close the deal before someone else buys the land at the price you want. Generally, a traditional home construction loan can take weeks or even months before funding your loan.
All hard money lenders will focus on your property more that your credit profile and income. They are more interested in your project’s viability than anything else. In most cases, they are even willing to lend you up to 90% of the total value of your property. Remember, borrowers with poor credit scores may have difficulty securing a conventional loan, making hard money loans an attractive option.
A ground-up construction loan can be expensive. It is something that not all borrowers can afford. The good news is that most hard money lenders offer you a competitive rate, allowing you to get the right amount of funding you need at the right price.
All these factors make hard money loans an excellent option for your next residential construction project. Compared to traditional house building loans, hard money loans offer you much more flexibility and come with much less paperwork. If you have difficulty qualifying for a conventional loan or need urgent financing, contact Real Estate Funding Solutions for assistance.
Contact Real Estate Funding Solutions For More Information!
The loan process can be complicated since lenders offer various types of loans. Whether you are hoping to secure a Hard money loan or a traditional ground-up construction loan, our team from Real Estate Funding Solutions can help! We have years of experience helping home builders get the appropriate project funding. Our team will discuss your plan and suggest the most profitable loan for your unique situation.
Real Estate Funding Solutions can offer you new construction financing at the most competitive terms for all experienced real estate developers and builders. We can assist your ground-up construction project by helping you cover the cost of your entire project. Our professionals will guide you through the loan process step by step from start to finish. We will make sure you successfully close on a transaction that’s most profitable to you in the long haul. Call us at 855-913-8637 to find a ground-up home construction loan that gives you a successful close.