Buying a new or old home usually takes money that comes out of your own capital or a loan you request from a bank and other institutions. But when you have the idea of building one, construction loans are what you will need rather than traditional ones. There’s a huge difference between purchasing an already existing property and deciding to build one.
The amount of time it takes to enjoy it is what you would think about before anything else, but the process of obtaining it and making the investment is what you need to consider. Based on what we mentioned before, people who are aiming for already built residential properties go for traditional loans or even hard money loans in order to purchase them.
If you are familiar with them, you must know traditional credits are those you usually obtain from banks, insurances, and similar entities. But they are most known due to how difficult is to obtain them because of the requirements and time it takes for approval. Now, why are we mentioning these credits when you are here for a construction project?
Because you need to understand the difference to determine if you truly want to go for it or maybe another option is more viable. To build a new home you cannot apply for a traditional loan since they aren’t for building projects but rather a one-time expense. In this case, buying real estate or a property that is ready or needs a few renovations. When it comes to construction, you need to obtain a credit that covers the amount of money you will spend on the project and for the amount of time it will take to build the home.
The loan should cover the cost of the land and construction of the property. So far, it seems like a common credit, but you aren’t even paying for it during the period of time when you are buying the land and building the home. Instead, you will be making interest payments to cover part of the amount you have to repay for the credit but the original loan repayment will take place after the construction is finished.
Our team at Commercial Real Estate Loan Pros of West Palm Beach will help you to understand what a construction loan involves and if it is the right one for you and, of course, offer you the credit you need. We are a private and large investment company that wants to offer great loan conditions, interest rates, and help real estate investors or people overall to carry out their ideas. In the case of this construction option, we need you to consider what it entails and determine if you are ready to take the step.
How do construction loans work?
As we mentioned before, they are not about applying for the credit and having several years to repay it. Instead, if you get your loan approved, you have to pay interest during the time your construction will last to finally move onto a more traditional mortgage, which is when the original loan payment starts. Now, the way it works lies more in how involved the lender will be in your project.
Unlike traditional credits, the lender isn’t someone that will provide you with the resources and leave it up to the conditions in the loan for you to repay the amount. In this case, it will be much more involved in the plans you have for your construction, how it will develop, the idea you have set, and how everything progresses. The reason behind this is because the lender will finance the project more than giving you all the money for it.
It can be confusing when you read it in this way. Therefore, let’s put it a bit simpler. Having a construction loan doesn’t mean you will have access to all the money for the project. Instead, the lender will pay the builder according to the intervals agreed for the project between all three parties—the lender, borrower, and builder. In other words, you won’t be the one dealing with the payments for your builder but rather the lender will be the one releasing more funds the more the project progresses.
Every time there’s a due payment, it will be handled by the one from whom you requested the credit. But, why is this necessary? Our team at Commercial Real Estate Loan Pros of West Palm Beach needs to make sure the construction you requested the credit for is progressing according to the previous plan you should have provided during the application phase.
This allows us to determine if the funds are being used for the goal that was established and if the builder is fulfilling its job. Since it is an agreement between three parties more than two, it’s important to keep an eye on the condition of the construction to determine if all parties are happy with how it is going. The fact that it works in this way is what leads you to pay interest during the time the construction lasts to then move to the repayment of the actual loan and the final amount that was provided.
What to do before applying for a construction loan
If you have a home construction in mind, you NEED to choose this type of credit. However, things aren’t as simple as you going to the lender and requesting it. Although the team at Commercial Real Estate Loan Pros of West Palm Beach makes it easier for you to apply for one, we need you to have some information and certain factors in mind:
- Find a contractor and determine how long it takes to build your home or property considering any factors that could slow down the project.
- How much will it cost? Also, include factors that could increase the price during the construction.
- Keep in mind the cost of your land and construction itself since both expenses need to or will be covered with the loan.
Once you have all this information, you are more than welcome to apply for our construction loans. We have different types of construction loans that can cover your needs and guarantee you are able to go for the home construction you have always wanted. And we even offer other options that allow you to go for more types of properties and construction projects.
Also, we have made sure to add conditions and requirements, but all of them are easy to meet and you won’t have difficulties collecting every document. We have reasonable interest rates and our team is quite flexible with the repayment deadline for each quote and in total.
There are so many areas or regions where we offer these services with most of them being cities.
However, if you need any of these services, you need to contact us. The list below comprises the areas where we offer these services.
We service all counties and cities throughout South Florida. However, if you need any of these services in other cities throughout the state of Florida, please contact us. See what services we offer below: