Things to Watch Out for When Acquiring a Construction Loan

Part of the process of building a new house is acquiring the financing needed to pay for the home’s construction. When a builder acquires a new construction loan rather than passing the task to the buyer, it streamlines the process for the builder and for the buyer. Not all loans and lenders are created equal, however, so here are some things to watch out for when acquiring new construction loans.

Adequate Loan Size

As a builder, you know that things don’t always go according to plan. Make sure you put together an accurate and detailed cost estimate and budget for contingencies that you’ve likely experienced in other residential construction projects.

Scalability

To keep your business growing, you need to keep building. However, not all lenders make it easy to get funding for multiple projects once you’ve been fully approved. When evaluating and acquiring a loan, make sure you’re also evaluating the lender to make sure it will be a good long-term growth partner for numerous future projects.

Cash Flow

Does the lender require cash for down payments, fees and closing costs? While larger builders may have the funds available to pay for those costs out of pocket, many small and medium-sized home builders cannot. To improve cash flow, seek a lender that will wrap these and other costs into the loan.

If you are a builder in need of financing or if you have additional questions about how to avoid construction loan dangers, contact Snap.Build^® today.