New Construction Loans to Build From The Ground Up.

For seasoned investors who are looking to challenge themselves by building a home from the ground up, a construction loan for investment property is often the most attractive option.

A new construction hard money loan for investors is a short-term loan used to finance the construction of real estate investment property. Like other hard money loans for new construction or renovations, a portion funds are distributed at closing to finance lot acquisition, and the rest are held in escrow. The construction funds held in escrow are distributed in arrears, or after certain phases of the scope of work are completed. The scope of work is used to create a draw schedule, which designates at which stage of the project certain work will be completed, and at what cost. Once a particular phase, or draw, is complete an inspection is ordered to confirm the work has been done. As soon as the hard money lender gets the confirmation, the funds are distributed. This whole process usually takes about 3 days. This draw process helps both the hard money lender and the borrower by keeping the project on track and within budget.

With most hard money loans, the loan amount is based on the as-is house or lot value combined with repair or construction costs. An additional benefit of a hard money construction loan is that there is no minimum credit score. However, keep in mind that unlike hard money fix and flip loans, experience is essential for an investment construction loan! ABL’s private lenders for construction loans are willing to fund up to 70% of the land value and 100% of the construction budget, capped at 70% of the ARV. With interest rates from 9% to 11%, points ranging 1% to 2% and a loan term of 12 – 24 months, seasoned investors rely on hard money construction loans like these for finance their business.

Any seasoned investor knows how crucial a quick close can be. Real estate investing is a growth industry, and good deals move quickly. As experienced hard money construction lenders, we close new construction loans for investors in as little as 48 hours, and have an average close time of 10 days, unlike a conventional loan which takes a minimum of 60 days to close.

How hard is it to get a construction loan? The process of securing a hard money construction loan is much different than that of a conventional mortgage. Unlike a conventional loan, which requires a significant amount of paperwork, a new construction loan for investors requires relatively light documentation. Once you have completed the hard money for new construction loan application, the loan officer and underwriter will review the deal with you and order an appraisal if the deal fits! The underwriter will ask questions about your experience, as well as request copies of the construction plans and other relevant documentation. From that point, ABL will issue a written term sheet that outlines all the loan’s details so there are never any hidden fees. The loan then moves to processing where the few required documents are collected, and ultimately the loan is closed by an attorney.

The primary definition of a new construction project is a vacant lot that will have a ground-up development or a lot with an existing structure that will be torn down with ground-up development to follow. Heavier renovation projects may be considered as new construction if they consist of an addition to the existing structure with an increase of gross living area greater than 100% of the existing square footage.

Ground up construction experience is defined as any project that was either sold or refinanced within the last 36 months, was completed within 36 months from start to finish, and falls within Asset Based Lending’s definition of a new construction project. The Borrower must have appeared on title as the Sponsor for the project. All experience verification is subject to Underwriting’s due diligence.