Construction Financing Success Has a Lot To Do With Lender Selection
In the world of construction financing, all lenders are not going to be relevant or best suited to your project.
Many times there can be considerable urgency in finding and securing a construction loan for a project about to commence and any source of financing will do, or will it?
In other cases, a property owner may become overly focused on the lowest cost sources of construction financing when they may not be the best fit for the borrower and the project.
A construction project is all about accurately predicting and controlling costs, coordination of work, and managing cash flow. The combination of these three elements can have a lot to do with your lender selection.
For instance, if you want to use an institutional lender to provide construction financing, you have to make sure you have the time to prepare and provide the necessary information in the qualifying process that can be fairly extensive for some projects. Furthermore, because draw approvals are very tightly controlled by institutional lenders, you’re going to need very precise project management in place, or a large contingency fund to cover any draw reductions that are not uncommon with this form of financing.
If you’re short on time to get the project started and want to focus on utilizing funding from a private construction mortgage lender, then make sure you spend a bit of time selecting someone that you’re comfortable working with.
Private lenders are mostly individuals, each with their own approach to approving and managing the loan process. This is a departure from a traditional banking scenario where processes and procedures are well laid out and documented. Therefore, it can be very important to not only understand the terms and conditions of a mortgage commitment, but also the manner in which a specific private lender will go about administering the draw advancement process.
Whether or not you choose an institutional or private lending solution, you’re still going to be working with an individual or individuals who will be responsible for working with you through the construction process. If the people you meet and interact with don’t inspire trust and confidence, you would be highly advised to look for another source.
Mortgage brokers are also part of the mix, serving as the middle man for both the approval process and some or a lot of the draw advance process. Being comfortable with your mortgage broker, if one is involved, is also important to the success of the overall process.
The negatives that can occur should be obvious. If money is not advanced in an orderly and predictable fashion, the project could be delayed, resulting in additional costs that may be hard to cover and potentially kill the profitability and even completion of the project.
If you’d like assistance with locating suitable construction financing as well as lender selection, please give me a call so that we can discuss your project requirements.
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About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel