When you start building a new home, you may consider different ways to fund it. Some people get a loan from a bank or a credit union and make payments on it over a long period of time. Others choose to work with hard money lenders because they offer several benefits that banks and other traditional lenders can’t. Keep reading to learn about the top reasons to pick a hard money lender over a bank when financing a new home build.
Find Business Partners
When you choose a hard money lender over a bank, you gain a partner for your financial decisions. With a hard money lender, both the lender and you often have the same goals of creating money and making sound financial decisions. This differs greatly from banks where you gain a creditor whose only purpose is to ensure you make regular payments on the loans and fulfill your loan obligations. Finally, through this partnership, the hard money lender can protect you from bad financial decisions.
Create Faster Closings
Real estate can be a fast-paced industry, so it’s important that you have the speed to react to excellent deals and opportunities that improve your financial standing. When you work with a hard money lender, they can provide the funding you need in as little as a few days, making it much easier to close deals and react to opportunities. Compared to a bank, there’s less paperwork. Banks also have risk managers who may prevent a loan from going throughout entirely, which can prevent you from getting the funds you need to finish a deal quickly.
Finally, the hard money lender often needs only one signature to get a loan for your needs. Meanwhile, banks have a lot of people that need to approve your loan before you can even see the money. This means that a delay in payment can slow down when you finish your building project, making it harder and harder to sell as time passes.
Have More Loan Flexibility
Hard money lenders can give you a lot more flexibility when they create loans for your projects. A lot of their flexibility comes from the fact that they only engage in certain projects so they can avoid lengthy processes. This flexibility increases the speed at which you can get loans but it goes even further. The flexibility hard money lenders can create includes being able to customize a loan to your specific project and needs, which can save you money in the long term as you only pay for aspects of a project you need, rather than a whole project.
In contrast, banks are often not flexible in the loans they offer and want to get the best payments from you. While this allows for more negotiating, it can also mean you don’t receive approval for loans you apply for with banks.
Engage in Opportunity Building
If you’re engaged in multiple projects that you expect to be successful and lucrative, then a hard money lender can become an excellent partnership to form. As you create more opportunities with your new home builds and succeed at selling the properties, hard money lenders may become more interested in working with you since you show consistent business acumen. These opportunities also allow you to complete a project early — letting you pay off the loan early — whereas bank loans may not allow you to do the same.
When you work with a bank, they care about your credit score rather than any business skills you have. Sometimes, you may have a great plan to sell a new home build but your credit score isn’t high enough for the amount of money you need from the bank and prevents you from getting the loan you need to complete your project. Ultimately, each time you start a new project, you have to go through the process of applying for a loan with the bank, which isn’t sustainable for long-term use.
Create a Business Relationship
Whether you have a private banker or not, bankers and creditors are constrained by the regulations of their bank, meaning that they can’t engage in opportunities at a fast pace, even if there’s a good chance to make money. In contrast, hard money lenders want to engage in excellent opportunities. This means that, as you succeed in finding more and more relevant opportunities, they want to engage in them more. This is especially true as you prove yourself capable of finding ways to make money. This allows both you and the lender to earn profits.
Avoid a Credit Check
Hard money lenders base the approval of your loans on whether your proposal has enough potential to generate money, rather than the status of your credit. This makes it easier for you to get loans as long as you can prove the merits of your project. You can have excellent credit, no credit, or bad credit, and it doesn’t affect your ability to get a hard money loan.
With Titan Funding you have to meet a 60% loan-to-value ratio with your project to be considered for our hard money loan. If you meet these requirements, then you can speak with one of our expert team members to develop a loan plan for you that meets the specific needs of your new home build, financial standing, and ability to pay the loan with the purchase of your property.
Now that you’ve learned about the top reasons to choose a hard money lender over a bank for new home builds, you can visit Titan Funding to learn about loan options available to you. While you’re here, you can also research the requirements for our loans and explore the different types of loans we provide, including hard money loans and much more. Finally, you can learn about our team and connections before meeting us. Contact us today to learn more about our services. We’re happy to hear from you and help you with your builds.
“House Being Built” by Kier in Sight is free to use under the UnSplash License