New Construction Loans
Financing for ground-up construction or tear down and rebuild projects. We can get your New Construction Loan for an investment property processed and approved for funding, fast.
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About New Construction Loans
LSM designed this loan program so that experienced investors and contractors have a straightforward, common-sense lending program that provides them the short-term capital needed to fund their construction projects. We offer fast close times and underwriting flexibility that is not available through conventional financing.
FAQs for New Construction Loans
Getting a loan can be confusing sometimes. Between underwriting requirements, loan rates and terms, it can be hard to figure out but we're here to help you! Here are answers to some very common questions we get...
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Do hard money lenders provide loans for transactional funding?Unfortunately, we do not issue loans for transactional funding.
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Why don't banks finance rehab loans?Banks are typically unwilling to take on the additional risk associated with lending for non-owner occupied properties. The underwriting process for conventional mortgages is drastically different and not suited for funding these properties.
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What type of financing is available for a house that needs rehab?Fix and flip loans, which are a type of bridge loan, are made for this purpose and can fund up to 90% of a property's purchase price and up to 100% of any renovation costs needed to make a property safe, livable and ready for sale to a future buyer. LSM specializes in these loans. For more information on rates, you can fill out an application to receive a quote specific to your project.
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What is the minimum credit score needed for a fix and flip rehab loan?Generally, the minimum required credit score for a fix and flip loan is 600.
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What percentage of the total cost can I borrow with a fix and flip rehab loan?You must contribute at least 10% of the total cost, which includes both purchase price and rehabilitation costs, at the time of funding. So the maximum loan value is 90% of the total cost.
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What are the minimum and maximum loan sizes for a fix and flip rehab loan?Loans for purchasing and rehabbing properties must be at least $75,000 and generally no larger than $2,000,000.
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What is a hard money lender?A hard money lender is a private lender that lends on properties that traditional banks and mortgage companies won't finance, particularly properties that are non-owner occupied or currently not inhabitable.
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What is a hard money lender?A hard money lender specializes in funding non-owner occupied properties, either ready to rent or ones that need a repair and renovation. Generally they're backed by private equity firms compared to traditional banks and financial institutions.
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Do hard money lenders offer general business loans?No, hard money lenders offer bridge loans, refinances, new construction and other types of business purpose, non-owner-occupied real estate loans.
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Can I apply for a hard money loan on commercial properties?While some hard money lenders may, we currently don't provide funding on buildings that are residential in nature, such as houses and apartment complexes. Restaurants, retail stores, office space, and other commercial properties cannot be funded unless they are part of mixed-use buildings in which the majority of the space is residential.
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Can I borrow as a non-US citizen?Yes, but the property must be located in the United States and you must have a US-based bank account.
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Can I borrow if I live outside the US?Yes, as long as the property is located in the United States and you have a US-based bank account.
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Can I apply from my phone?Certainly! Our application process and self-service portal work on any desktop or mobile device. Apply in the page header on our website.
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Is a hard credit pull required when applying for a loan? When would my credit be run?We do not run a hard credit pull for quoting the loan. Only once you decide move forward with the full application process, a credit and background check would be run.
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How does money lending work?Generally, an application to borrow is submitted containing what kind of property is being purchased, or if the property is owned and looking to refinance or withdraw equity. The borrower is then pre-qualified and given a rate quote based on their credit and amount being borrowed. If he/she decides to move forward, the formal application process begins and supporting documents proving income, property information and credit information are submitted to underwriting for review. Title search and appraisal are ordered. If the risk is considered within acceptable threshold, the loan moves forward to begin the funding process where eventually the loan is dispersed in a method specific to the loan type.
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Do hard money lenders check credit?Hard money lender policies vary, but generally a soft credit pull may be used for a pre-qualification on the initial application to understand general eligibility and rates. This is similar to credit card pre-approvals, and the soft pull does not show up on your report. A hard credit pull is required when moving forward with the full loan application for funding.
Maximizing Your New Construction Success
Some items to consider when trying to maximize the value of any new construction project.
Looking for more detail?
Are you thinking of building a new investment home? There are many benefits to doing so, including the ability to customize the home to fit the current demographics and an added sense of comfort of builders' warranties.
Benefits:
✓ There is an increasing demand for new construction
✓ Higher code standards for energy efficiency
✓ Ability to control margins when building to suit
✓ Warranty on home and appliances available that can be transferred to the buyer
However, there are also some things to watch out for:
✓ Ensure the land is zoned properly
✓ Surveying has completed and is approved to build by the local municipality with approved utilities
✓ Speculative building can be risky if you don't understand your buyer demographic well enough, leaving a home on the market longer than expected
By working with a reputable builder, you can avoid some of the pitfalls that can occur during construction.
Understanding the volatile nature of construction costs and materials can also help you to budget properly and avoid any surprises.