Developers and home builders sometimes have trouble finding financing for their speculative real estate ventures. Traditional financial institutions don't always feel comfortable lending funds for empty retail spaces or spec houses. Tying up cash by making a personal investment may not be feasible. Another possibility for Washingtonians, are the hard money construction loans Seattle lenders will make, if you qualify for them.
Developers use these kinds of loans all the time. They get comfortable with the fact that the cash has to be repaid within twelve to twenty months, and that the actions of the lenders are not regulated by the Federal Reserve. There are private investors who cut corners and are basically loan sharks however. Finding a reputable lender should be your first priority.
There are pros and cons to using these lenders. They have the ability to approve your application quickly and fund your project just as fast. If you are in a hurry, they can be very convenient. The transactions are short term though, and the interest rates are high.
If you don't have the best credit, this could be a good option for you. Private lenders are more concerned with the value of your collateral than your credit score. You are going to need to show the architect's renderings, construction budgets, and the contractor's bid sheets. Current comparable sales, market history, and market stability will all factor into the lender's final decision.
Although your collateral is the most important asset in your bid to get a loan, the lender will also be interested in your personal financial history. You may have to give them copies of tax forms, pay stubs, and bank statements. If approved you will probably only get about seventy percent of the total cash investment you need.
Since these transactions don't fall under the Federal Reserve guidelines, the lenders have more leeway in what they expect in the way of repayment, interest, and fees. You need a lawyer to look over the contract before you sign it. If the details aren't spelled out, you should be concerned. You need to look for personal liability and interest accrual paragraphs in the contract.
Since the lender can okay a project within a matter of weeks, you need to have everything in place to start immediately. You have to be prepared to have cash on hand to pay for underwriting fees and closing costs. Contractors, architects, and suppliers need to know what the turnaround time is. If the loan is for twelve months, the project has to be completed and sold by then.
Hard money loans are convenient for builders who need financing for construction. Banks prefer to loan money for lower risk projects that are finished and leased. You can always take out a hard money loan to cover the cost of building a project and apply for a long term loan, with lower interest rates and a longer approval period, to operate your completed development.
Developers use these kinds of loans all the time. They get comfortable with the fact that the cash has to be repaid within twelve to twenty months, and that the actions of the lenders are not regulated by the Federal Reserve. There are private investors who cut corners and are basically loan sharks however. Finding a reputable lender should be your first priority.
There are pros and cons to using these lenders. They have the ability to approve your application quickly and fund your project just as fast. If you are in a hurry, they can be very convenient. The transactions are short term though, and the interest rates are high.
If you don't have the best credit, this could be a good option for you. Private lenders are more concerned with the value of your collateral than your credit score. You are going to need to show the architect's renderings, construction budgets, and the contractor's bid sheets. Current comparable sales, market history, and market stability will all factor into the lender's final decision.
Although your collateral is the most important asset in your bid to get a loan, the lender will also be interested in your personal financial history. You may have to give them copies of tax forms, pay stubs, and bank statements. If approved you will probably only get about seventy percent of the total cash investment you need.
Since these transactions don't fall under the Federal Reserve guidelines, the lenders have more leeway in what they expect in the way of repayment, interest, and fees. You need a lawyer to look over the contract before you sign it. If the details aren't spelled out, you should be concerned. You need to look for personal liability and interest accrual paragraphs in the contract.
Since the lender can okay a project within a matter of weeks, you need to have everything in place to start immediately. You have to be prepared to have cash on hand to pay for underwriting fees and closing costs. Contractors, architects, and suppliers need to know what the turnaround time is. If the loan is for twelve months, the project has to be completed and sold by then.
Hard money loans are convenient for builders who need financing for construction. Banks prefer to loan money for lower risk projects that are finished and leased. You can always take out a hard money loan to cover the cost of building a project and apply for a long term loan, with lower interest rates and a longer approval period, to operate your completed development.
About the Author:
You can find details about the benefits of taking out hard money construction loans Seattle companies offer at http://www.privatecapitalnw.com/construction-loans right now.