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As an experienced residential real estate builder, you might tackle a variety of construction projects, from single family homes to multi-family rental units. But translating construction project blueprints into a dream residential property requires vision, planning, and — funding.
Fortunately, you have a variety of financing options to (literally) build your dream, including new construction loans. But what is a new construction loan? What are the benefits of a new construction loan? And how can you get this specialized construction loan?
Read on for a quick primer crafted just for builders.
To help you get your project up and running quickly, you can choose to get a new construction loan to cover project costs before you obtain long-term financing. Designed to offer a simplified financing solution, a new construction loan provides funding for builders looking to construct new residential properties. Although it appears somewhat similar to a traditional mortgage, a new construction loan differs in its approval process (typically quicker), terms (shorter duration), and disbursements (several milestone payouts rather than one lump sum).
This short-term loan typically only covers a 12-month period rather than stretching for decades like a traditional mortgage. However, certain loan programs, such as Haus Lending’s Ground-Up New Construction Loan, extend that out to 18 months to make loan repayment more convenient for borrowers. Depending on the project, the construction loan could cover the land, permits, fees, materials, contractor labor, closing costs, reserves, and other associated project costs.
Due to the short timetable of a new construction project, you must provide the lender with all the project details during the approval process, such as the project timeline, architectural plans, and budget. Some lenders, like Haus Lending, do not require the project to be permitted by the local municipality or zoning board as part of the loan application process. Once you get a “yes,” the lender will create what’s called a draw schedule, tying incremental borrower payouts to key construction milestones (such as when the foundation is poured, the framing begins, etc.). An inspector or appraiser will monitor the work progress throughout the build, inspecting and approving the milestone achievements that trigger the payments.
Check out these benefits of new construction loans:
Typically, getting a new construction loan starts with a phone call or online application.
At Haus Lending, we offer a Ground Up New Construction Loan, a simple, no-nonsense loan program that provides fast funding for a fast-paced market. If you plan to build a one- to four-unit residential rental property, our rates start at just 7.95%. With financing spanning all budgets, we’ve got you covered, with new construction loans ranging from $50,000 to $2,000,000.
As a leading nationwide platform that has funded nearly $3 billion in loans, Haus Lending can help you build your dream rental property. To start the application process for a loan, or to speak with a loan specialist, fill out the application form or call 1-877-464-4287.
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