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New Construction Hard Money Loans – What You Need to Know

Real estate project financing can be complicated. Many developers find it hard financing for construction loans due to obvious factors.

A construction loan is a high-risk venture for many lenders, so loan officers and management scrutinize every detail of the project before deciding whether or not to fund the transaction. In many transactions, mountains of paperwork and endless back-and-forth with the lender can be the norm.

image - New Construction Hard Money Loans - What You Need to Know
New Construction Hard Money Loans – What You Need to Know

If you are the borrower, this can be both time-consuming and costly. Because of these concerns, you may want to consider hard money lending for your next construction project. That type of financing could be exactly what you need to stay on track and complete your project on time and within budget.

Distinguishing   Between Traditional and Hard Money Construction Loans

Whatever the state of the real estate market, one thing remains constant: real estate investors require funds to fund their projects.

As the real estate market has evolved, it has become increasingly difficult for developers to promptly obtain the funds they require from traditional lenders. Increasing paperwork and documentation are just a few factors contributing to the delay in loan closings.

Hard money loans for new construction can make a significant difference in this situation. These loans are an excellent option for developers who need funds to start a project but may not be a good fit for a traditional loan.

They can also be useful for people who need to meet a deadline or do not want to wait for a government or conventional loan.

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The Money Factor and Where The Funds Come From

Traditional construction loans are financed by credit institutions such as banks. However, hard money loans are made by investment groups and hard money lenders.

This lending style is not subject to formal banking requirements, giving lenders more flexibility in setting lending terms. A new home loan is usually secured at the time of purchase of the property.

They charge higher interest rates, but each construction loan costs multiple costs for existing real estate.

In addition, the lender requires you to invest some of your capital in the project. The percentages you enter are based on experience and project specifications. However, most lenders charge at least 20-30 percent of the cost.

Traditional mortgages can take months to be approved, whereas coin loans come into play. It depends on the lender and the project, but you can often get money within a few weeks.

Developers with a strong financial background who can use traditional credits often choose coin credits because they can get up and running faster.

What to Consider before Sign up for New Construction Hard Money Loans

When figuring out where to settle on traditional or hard money loans for your new project,  keep the following questions in mind;

What Loan Structure Do You Prefer?

When considering a construction loan, loan structuring is also an issue. Traditional lenders take a one-size-fits-all approach to lending. There are predetermined terms with little to no leeway for your specific requests.

The loan committee considers only projects that meet those criteria. There is an exception if you have a long track record with that lender. More flexibility is possible, but it is not guaranteed.

You can get a flexible collateral release and loan repayment terms from a hard money lender. Finally, the lender can structure your loan terms to benefit both you and the lender. Furthermore, their repayment schedules can be tailored to your specific requirements.


Obtaining loan approval is critical for construction loans. There are several reasons why builders may not be approved through traditional channels.

Even if you have a solid financial history, the bank may notice something in your application that does not bode well. Being self-employed or not having the proper paperwork can easily get you denied.

When evaluating applications, hard money lenders look at more than just the company’s financial history. They also consider your ability to repay the loan and your contribution to the project.

They can take on a broader range of projects than traditional lenders because they don’t have a set criteria list to check off.

When Money Is Required

Time is critical in the real estate industry, especially when new construction. Getting a loan quickly can mean getting a great deal and missing out entirely. While approval and funding times for construction loans vary, hard money lending is typically faster.

While hard money loans for new construction are frequently funded within a week, traditional lenders can take 30 days or more. This excludes the application process. Traditional lenders can take two to four weeks but only one to two days for average hard money loans. for