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How to Get a New Construction Hard Money Loan in Connecticut

New construction loans are a bit harder to get than a hard money loan to complete a renovation due to the experience typically required by the lender to build a new single family or multiple family structure. However, if you are a builder with a couple of successful projects under your belt and you want to close the loan quickly, then please keep reading.

Find a Local Lender: Look for a lender who operates in Connecticut. Local lenders are usually more familiar with the local real estate market conditions and can provide more relevant advice and guidance. You can search online, attend local real estate investing meetups, or ask for recommendations from real estate professionals in your network.

Evaluate Your Lender Options: Research the potential lenders thoroughly. Look at their reputation, loan terms, interest rates, and customer service. Speak with previous borrowers (if you can) to get a sense of how the lender operates. Ask how quickly the lender can close and pay attention to how the question is answered. You want a lender who uses their own money versus a lender that
needs someone else to approve and fund the loan.

Prepare Your Proposal: Create a detailed proposal for your project. This should include information about the future value of the property, detailed construction plans, status of your permitting and approvals with the town, your scope of work (SOW) and draw schedule, and your exit/marketing strategy. The more detailed and thorough you can be, the more likely the lender will consider you a solid investment. Most lenders will want you to have an accepted offer on the land (or own it) as proof that you are serious about closing a loan with them, or anyone else.

Create an LLC: Most hard money construction lenders want to lend to investors as opposed to those who are planning to live in the house that they will complete with the hard money lender’s money. As evidence of the project being an investment, the lender will expect you to agree to purchase (or already have purchased) the property in the name of an LLC as opposed to your individual name. It is easier to form an LLC in Connecticut as opposed to some other state.

Apply for the Loan: Once you’ve chosen a lender, you’ll need to fill out an application. This usually involves providing information about the property, your finances, and your real estate experience. The lender will then review your application and decide whether to approve your loan.

Undergo Due Diligence: If your application is approved, the lender will conduct due diligence. This usually involves an appraisal of the property, a title search, a review of your financials, and a conversation regarding your experience. If everything checks out, you can move to the next step.

Close on the Loan: Once the due diligence is completed, you’ll need to sign the loan documents and pay any upfront fees. After that, the loan funds will be disbursed, typically either directly to you or to an escrow account, depending on the terms of the loan.

Remember, hard money loans carry higher interest rates and fees than traditional bank loans, so be sure to thoroughly understand all the terms before signing. It’s also wise to work with an attorney or a real estate professional to ensure you fully understand the loan terms and the risks involved.

Loan Pre-Qualification