For many companies, finding the best construction loan lenders isn’t about just saving money. It is also about ensuring that construction goes smoothly. If the financing becomes problematic, that impacts virtually everything the company is doing.
There are certainly ways to avoid problems during the lending process, but most don’t know how. Ironically, standard academia doesn’t generally cover how to structure a loan. Despite it being something most any business will utilize, loans are hardly understood in modern day.
These problems range from complicated loan terms, to the problematic relationships that companies often have with their lenders. Today, we’re going to help you evaluate the best options available for your company.
How To Find The Best Construction Loan Lenders
To determine whether a lender is the right fit for your company, there are some standard things to consider about each lender. Let’s go over those now:
- Is there a down payment required for the construction loan? (Many companies want 10%, 20%, 30% or more)
- Depending on the lender you choose, you may have lower or higher interest rates.
- Some lenders only deal with short-term construction loans. It is paramount to determine the loan terms, otherwise you could owe repayment faster than expected.
- Is there a minimum credit score required? After 2020, the number of lenders who require a minimum credit score has risen tremendously. (Especially in regard to traditional banks or lending institutions)
- What state do you operate in? Many lenders have restrictions for particular states and can only lend to specific areas.
- There can be a minimum loan amount. Be sure to ask whether there is a minimum amount you must borrow. (This is particularly important if you don’t need much capital for a loan)
- Many companies will not issue a construction loan if it is for an investment property.
- During construction, the lender might require that you only pay interest payments, which doesn’t allow you to pay the loan off, only the interest accrued. (This can mean you are going to pay a hefty price for the loan!)
- Although not common by any means, some companies want to use construction loans for personal property. It is important to note that many lenders do not issue construction loans for second homes or multi-family homes. Be sure to verify what the loan can be used for!
What Should I Look For When Finding A Lender?
Although every company’s situation is different, most will be looking for the following with their lender:
- Does the lender provide low down payment requirements?
- Are there flexible credit requirements/minimums?
- Does the lender provide project coordination? Are they going to help you structure the loan to best fit your project’s timeline?
- Is the lender a marketplace or a direct lender? Both work, but find out which one you are working with.
- What is the average closing time for a loan? It is one thing to be approved, but to close on the loan requires more than pre-qualification.
- Can you prequalify?
- Does the lender have experience with government backed programs?
- Does the lender have fixed or adjustable rate options?
- Are there flexible down payment options?
- Do you have a loan for the land already? Some lenders will allow special terms for your new loan because of this.
What Do I Need To Have When Applying For The Loan?
There’s a few things you’ll need when applying for a construction loan:
- Architectural plans.
- Your builder certification.
- Building code compliance.
- Inspection schedule.
- Your budget, schedule, and timeline of the project.
You should also have some money put aside for a down payment. Generally, a lender will want some collateral for the loan. (There are exceptions however)
Things To Remember About Construction Loans
Although you might already know a few of these specific details, most aren’t aware of how a construction loan works. Furthermore, many companies don’t realize how a construction loan is classified.
- A construction loan is a “short term loan”. This means you are going to have higher interest rates in most cases. (The loan generally lasts 12 months)
- Although a construction loan can be financed with 10% down, most traditional construction loans require a minimum of 20% down. (VA or USDA loans can actually be 0% down)
- Rates for a construction loan are usually between 5% and 10%. But each lender is different, so verify what they offer!
How To Make The Process Faster
Remember that for most endeavors, there is a middle-man. Someone who knows how to get what you want faster and easier. Loans are no exception to this. Loan brokers have been around for many years and serve as perfect specialists for construction loans.
A loan broker will usually do the following for you:
- Connect you with a lender that will serve your needs best.
- Negotiate the terms of the loan.
- Provide you with the necessary documentation and explain what everything means.
- They only get paid at closing, so they are motivated to see you get the loan you need.
How BLB Is Making Lending Easier
Here at Business Lending Blueprint, we are teaching people how to become business loan brokers, and quit their jobs. Building businesses and generating passive income are what our students learn here. If you’d like to see how we can take virtually anybody and turn them into a loan broker making 6-7 figures a year, then you should click the button below to learn more!
Our students learn what it means to build a “recession-proof” business that outlasted even the economic problems in 2020. When businesses were closing, people getting laid off, our students were thriving! Connecting companies with the working capital they needed. (While they made a commission off of the closing)
We aren’t promising a system without learning or work, but we are offering something that has proven results even in bad markets! With greater Geo-political issues arising, it isn’t a matter of “if the economy is going to further crash, it is a matter of “when”!
Take action now and start learning how to secure your business, and or quit your job. Our program is the most thorough on the market. (We even designed a free training video showing how the entire thing works!)
See you soon!