The housing market is hot. There’s no denying that. With the market stoked and housing inventory especially low for the foreseeable future, building a new home is an exciting future for real estate investors. When searching for investment opportunities, now is the time to search for properties on which you can build a new home for purchase.
The first step after finding your perfect project location? Financing. With cash-in-hand buying not always a viable option, the project financing realm boils down to two basic options: Hard money or traditional bank loans. While loans from a bank may feel like a good option for your financing needs, hard money loans are often the better choice. Let’s take a look at some key reasons hard money loans are your best option to finance your new home build:
Speed of closing – Every deal has a deadline – especially those deals which involve purchasing a property on which to build. While banks require a plethora of forms and verifications of income, hard money lenders do not require such strenuous review of your qualifications for the loan. If your credit score qualifies and the project sounds to be of sound investment, a hard money lender can provide you with the financing you need within a week of your initial application. The ability to generate your funding quickly provides a key advantage to you in hot markets which are flush with competition.
Loan flexibility – Bank terms are designed to be air-tight and standardized. Hard money lenders don’t often have such standardized loan terms, as underwriting is done for each individual client. While even first-time clients can work with hard money lenders to build terms which work for all parties involved, becoming a repeat consumer with a hard money institution can increase your ability to modify and build loans in an especially personalized way.
Opportunity building – Hard money loans can feel imposing because of their comparatively high interest rates. Don’t be discouraged by those percentages just because a long-term bank loan comes at a lower interest rate – many hard money lenders do not have early payment penalties. Especially with the market so hot, if you complete your new home build on or ahead of schedule and can make a sale before the end of your loan terms, you can close out the loan ahead of time at no cost to you. Similarly, if your project falls behind, you can secure a long-term loan with a bank at one of those lower interest rates in order to close out your hard money loan before your term is up.
Ultimately hard money loans are ideal for sourcing money quickly. With no need for bank statement reviews or other bureaucratic speed-bumps, hard money is lent out on collateral. This streamlines the underwriting process and provides you with the opportunity to take out a loan with terms which are customized to your exact needs. Especially in an environment as hot as the current real estate market, the wait for a traditional bank loan can cost you opportunities to build.
If you’re ready to begin your next new home build, consider EMCAP Lending your premier provider for hard money loans. With decades of experience, our expert team looks forward to working with you. Contact us today to explore how EMCAP can fuel your next project.