Are you getting ready to build a property and are wondering how to finance your build?
Whether you are building a home or an investment property, paying for the project can be an intimidating process. Coming up with the downpayment for your new project can seem like an overwhelming task to complete.
This can result in you feeling stressed and discouraged, which can set your project on the wrong path right from the start.
Fortunately, there are several options you can use for funding your new build. By knowing your options, you can choose the best one for your situation.
If you need to fund your new build but aren’t sure what your options are, this short and simple guide is for you.
Conventional Loan
One of the most common options for is financing your property is a conventional loan. These loans are easy to understand, have low interest rates, and are great for long-term financing. However, they can take a while to underwrite and do not allow for much flexibility.
Portfolio Loan
A loan you should consider is a portfolio loan. With this type of financing, the loan stays in-house, which results in added benefits for the borrower. They can have fewer income requirements, are quick and easy, and do not require as much documentation as other financing options.
Adjustable-Rate Mortgage (ARM)
Another common type of financing is an adjustable-rate mortgage (ARM). This is a mortgage with a fluctuating interest rate, depending on the market rate at the time. You can also choose a hybrid ARM, in which the rate is fixed for a certain number of years and then becomes adjustable.
Seller Financing
Seller financing is an interesting way to fund your new build. With this method, the seller finances your loan for the property. The terms are usually much shorter, and most sellers require a balloon payment within a few years.
Private Money
Private money is a type of financing that involves working with a private investor. With this method, you don’t need to meet any qualifications and the loan structure is flexible. If you are considering your property finance options, consider using private money.
Hard Money
Hard money is similar to private money, however, you are working with a hard money lender instead of a private investor. This means the lender uses your property or home as collateral instead of determining your ability to pay. These loans typically come with unnecessarily high interest rates and have much shorter terms.
Consider These Funding Options When You Want To Build a Property
These are the options you have when you need to fund and build a property.
Some of the options include a conventional loan or a portfolio loan. You can also consider an ARM or seller financing. If you are running out of options, consider using private or hard money to fund your new build.
Choose one or more of these options to get the financing your need for your next property build.
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