A Construction Loan finances the construction of a residential or commercial real estate property. This type of financing differs from a traditional mortgage in that it is a short-term loan that provides funding in waves instead of one lump sum amount.
Construction loans can be used to cover the costs of land, contractor labor, building materials, tools, permits, and more. If you are looking to renovate an investment property or build your dream home, contact Opportunity Business Loans today. We would love to provide you with the financing you need through flexible mortgage options.
With a traditional mortgage, your real estate property acts as collateral and, if you default, can be used to pay your loan. However, with a Construction Loan, the lender doesn’t have that option. This is an additional risk which makes it harder for borrowers to receive Construction Loans.
Construction Loans have shorter terms than traditional mortgages because they are dependent on a construction project. This means when you apply for a Construction Loan, you will need to provide a construction timeline, detailed plans, and a realistic budget.
Once approved, you will be put on a draw schedule that follows the projects construction stages instead of receiving a lump sum like traditional mortgages. A draw schedule is a plan that consists of the lender releasing funds slowly as each project milestone is completed.
Depending on the Construction Loan you choose, you might be able to convert the loan into a traditional mortgage once the property is built.
10,000+ Construction Loans Closed Since 2010
Before applying for a Construction Loan, you should meet with an architect to have plans and specifications drawn. Also, negotiated a contract with a builder to reflect the total cost to build so that a loan amount can be established. This will come in handy when applying for your loan.
Lenders will review your employment history, savings, income stability, and overall ability to repay the loan in addition to the plans and budget of the project. Opportunity Business Loans offer flexible requirements so that you can get the financing you need, whether you are a real estate pro or beginner.
The capital you secure through a Construction Loan can be used for a variety of things, including:
Depending on our real estate investment strategy, there are different types of Construction Loans that might be a good fit for you. Below are the most common types of Construction Loans. If you are unsure which option fits your investment needs, give us a call. We would be happy to help you secure the capital you need to invest in a new real estate property. Whether you are a beginner investor or have been doing this for years, we are here to help.
A Traditional Construction Loan is used to purchase a lot and/or construction a building on a lot you already own. This financing option is specifically for non-owner occupied properties with the intent of retail or future rental income.
This option is commonly used for apartments, hotels and motels, condominiums, self storage facilities, retail buildings, industrial buildings, or multi-family units.
Fix and Flip Loans are traditionally for seasoned real estate investors who have experience in purchasing, fixing, and reselling properties within a short period of time. Most conventional lenders will financed these projects as long as you have an excellent financial history and have years of experienced as a real estate investor.
If you have neither the financial history or the experience, Opportunity Business Loans is the right lender for you. With offer flexible lending solutions that help new and experienced investors secure the funding they need to take on any real estate investment.
Purchase and Rehab Loans are used to purchase an old property and either demolishing it to build a new building or completely remodel it to fit today’s standards.
This financing option is relatively easy to get approved for but offers lower amounts than traditional construction loans. This is best when you are only renovating and not building a property from the ground up.
A Construction-to-Permanent Loan will provide the funds you need to build the property and to secure your permanent mortgage. First, you borrow money to pay for the cost of building the property, then, once construction is complete, the loan is converted to a permanent mortgage.
Once it is a permanent mortgage, you make payments that cover both interest and principal. During this time you can opt in for a fixed or adjustable rate mortgage.
This option is similar to Construction-to-permanent loans except it doesn’t include the long-term mortgage. Construction-Only Loans provide the funds necessary to complete the construction of the property, but you are ultimately responsible for either paying off the loan at maturity or obtaining a mortgage to secure the long-term financing.
Although there are times when this is the best option, a Construction-to-Permanent Loan is often cheaper and easier since both loans are bundled together. This cuts down on underwriting fees, appraisal fees, and it is overall easier to work with the same lender for both loans.
If you are looking to make upgrades to an existing property rather than build a new one, you can look for a Renovation Loan. This comes in a variety of forms depending on how much money you’re expecting to spend on the project.
With these financing types, the lender generally doesn’t require the funds to be used in any certain way. Using traditional construction loans are for larger scale projects that have project plans and budgets.
An Owner-Builder Construction Loan is designed specifically for borrower’s who are also acting as the home builder. If you are doing all of the construction yourself, this might be the option for you.
However, this loan can be difficult to get approved for because lenders usually won’t allow the borrower to act as the builder due to the complexity of constructing a home. This task takes a lot of experience to comply with necessary building codes.
Lenders that do allow this loan require the borrower to be a licensed builder.
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After submitting your application, our advisors will evaluate your business profile and match you with lenders who can offer the best financing for your business.
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