When building your dream home it’s easy to lose sight of the details especially when it comes to financing. While managing the day to day grind on the work site, the last thing you need to worry about is your loan. You wont have to worry if you follow these 3 simple tips to risk less when it comes to new construction loans.
The first tip is to have refinancing secured ahead of time.
These sorts of loans are almost always short term arrangements with terms usually no longer than twelve months.If you don’t plan on selling your shiny new house, you’ll need to have money to pay off your initial lender. So ideally before any work starts you should have a long term lender in mind and have refinancing worked out before your initial loan comes due.
Another thing you need to know about with construction loans is something called the draw process.
New construction loans Arizona are given in draws; the second way to risk less is to have a clear plan
The next tip is to have a plan and stick to it. I know it seems obvious, but when it comes to construction loans following this bit of advice is crucial. You see the funds from construction loans are given bit by bit, usually on a monthly basis to cover the cost of work over a given period. So you need to have a clear, well-budgeted plan for each phase of construction to ensure you’ll have enough money on a monthly basis to keep work going.
If you don’t plan each phase of your project carefully, one month you might not have enough money to pay your contractors. What happens then?
Work stops until your next draw is given, and with your project set back by a week a month or more, your loan could come due before construction is finished.
If you ignored our first tip, the fact that your home remains unfinished will prevent you from refinancing. Then your initial lenders going to foreclose on your dream home before you ever set foot in it.
As you can see a lot can go wrong when it comes to construction loans. Which leads us to our next tip:
With new construction in Arizona loans you need flexibility, so the third tip is to have a lender you can work with
The next tip is have a lender you can work with. Don’t just do a quick online search and get a construction loan from someone you’ve never met.
Why? Well, theres a couple laws of nature: What goes up must come down, and if you have a plan something will go wrong.
Lets say some crucial materials, pipes or insulation, get damaged before they can be installed, and your supplier refuses to give you a refund. You might call that big national construction lender, requesting more money, to which they might say “sorry a deals a deal.” Without that extra money, you’re entire plan is thrown out the window. Your house will sit unfinished, again this will keep you from refinancing and that impersonal lender who refused to negotiate with you will foreclose. So get a lender you can work with.
Because a lot can go wrong in a construction project, and the last thing you need to worry about when building your dream home is your loan. So follow these three tips to risk less: have refinancing in place ahead of time, have a clear work schedule and have a lender you can work with.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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