A construction loan, similar to most commercial mortgage financing situations, has a direct correlation between the cost of financing and the time it takes to get the construction mortgage in place.
If you want to locate and secure the cheaper forms of construction financing, you’d better start the process early. The lowest cost forms of financing come from banks and low rates are only provided to low risk scenarios, and low risk scenarios can have a considerable amount of applicant and approval requirements.
This is one of the reasons why private lenders provide such a large percentage of construction loans every year. While a private lender is going to have requirements, there tend to be fewer than what you would expect at a bank and the time to review the application information and make a decision is also shorter due to the fact that there are going to be fewer people involved in the process.
At the same time, no amount of lead time is going to make up for a project profile and borrower financial profile that would not qualify for a bank financing facility anyway, so its important to be able to determine if the cheaper forms of construction financing are even going to be an option for you.
Assuming you can qualify for a bank or institutional construction loan, you should be applying at least 60 days before the project will start which could be 90 days before any funds are actually disbursed by the lender.
This many seem like a ridiculously long period of lead time, and we’re definitely not saying it can’t be done faster. But if there are any slow downs in the process that are out of your control, you could very well run out of time, making the whole exercise of applying a waist of time or creating additional costs or risks to your project by having a delay in getting started.
The best way to know what your options are, who you should be applying to, and how to manage the process so that everything gets completed in the time you have to work with is to work with an experienced construction mortgage broker who can quickly zero in on your best options and then work with you and the lender to get everything in place so the project can start on time.