Construction Loans

Construction loans aren't always just for constructing new buildings or multi-building complexes. They can be used toward the expansion or remodeling of an existing structure, such as an old apartment complex, for example. Some people get construction loans to re-finance an existing mortgage or acquire a newly built structure.

Generally, however, construction loans are short-term loans given during the construction process. The lender--either a private investor, bank, or other financial source--makes periodic payments to the builder while the structure is put together. Like other specific loans, there are a number of criteria that must be met before the loan is approved and given.

Construction Loans: Experience Required

Getting a construction loan is easy ... the second or third time you get one. The first time, however, can be very difficult, especially for larger projects. Banks and other lenders prefer to see a person or business with a proven track record; if you have a project or two under your belt, your chances will improve greatly. You can still get financing even if you are considered a risk, but you might get higher interest rates as a result.

Be knowledgeable when you apply for a loan. Know exactly what you need, what the local real estate market is like, and where your repayment is coming from. If a lender doesn't see a viable means of getting the loan paid back, you probably won't get approved. Learning what the market can bear is a great way to learn the local trends, prices, and construction ins and outs.