Building a house, renovating an old one, or making significant adjustments to your property sounds exciting until the cost factor stabs you from behind. But to cope with this cost factor, millions of contractors count on construction loans and they have plenty of construction loan lenders to choose from.
If you are planning to seek funding for building your next project, here we have pieced together some of the best construction loans you can consider to finance your dream project but before then get acquainted with all the pros and cons of seeking a construction loan.
Benefits And Drawbacks of Construction Loans
Construction loans are the most reliable credit tools when it comes to financing a domestic or commercial project. Although this credit facility is no less than a blessing to cope with the cost of a project, it also has some drawbacks that cannot be neglected. Let’s understand at what cost you can get a construction loan.
The Major Drawbacks
- The beneficiary of construction loans often gets a period of 12 months to pay off the debt. Thus, the short repayment method can be a matter of concern for most people.
- The construction loans differ from fixed-rate mortgages as they charge a higher and variable interest rate.
- Also, only certified builders can easily qualify for construction loans.
The Major Benefits
- It is the best credit facility to fund projects like building homes and other related real-estate constructions.
- Unlike mortgages, construction loans enable contractors to save money on construction.
- At the end of the loan term, this credit tool can be refinanced and it can be also converted into a long-term mortgage.
- It comes with feasible payment options.
- The best thing about these loans is they cover all entire costs incurred during the project. From material to equipment and other related costs, it covers everything.
What Are The Best Construction Loans in 2022?
Here is the detail of the best construction lenders you can count on for your next construction project.
Number One: Wells Fargo
Wells Fargo is a popular name in the lending industry; it is especially famous among the contractors’ communities. The company provides different types of construction loans and its representatives are available everywhere to provide excellent customer service.
The major element that makes Wells Fargo a leading construction loan provider is that it provides a rate lock option to its beneficiaries that lock their interest rate for two years. This reduces the overall interest on the loan thus is a good option to rely on.
The company also provides a good service and you don’t have to make any extra efforts to be able to qualify for the loan. You can fill out the online application form available on the website to apply for the construction loan.
Wells Fargo also has a long chain of consultants located around the country thus you can access them whenever you need them. Another factor that makes the company one of the best construction lenders is, it provides home equity refinancing.
Nonetheless, there also are some drawbacks of this construction loan lender and the leading one is, it requires you to provide a higher credit score to qualify for the loan. Also, the loan closing costs for these construction loans may be highly variable.
Wells Fargo covers up to 89% of your home value, which makes it the go-to construction loan for contractors.
Number Two: Normandy
Normandy is another construction lender that can lend you up to $4 million at 10.95% APR. Sounds like a good option? Yes, it is.
Besides construction loans, Normandy offers several other benefits including advisory services for home construction and land loans. As of now, the company has provided up to $800 million to contractors related to the construction sector in several US states.
The company also provides good services in terms of online applications and the registration process also is quite simple. The loan qualifiers also will receive their funds within 21 days of filing the application.
Although it provides multiple types of construction loans and land loans, you will be required to meet some strict pre-qualification requirements to be able to get the loan. Also, the interest rates are also quite high and you will be charged at an APR of 10.95%.
Number Three: The NKBC Bank
With over 25-years of industry experience, the National Bank of Kansas City (NKBC) is another reputable bank that offers a variety of construction loans. Some of its popular home loan products include VA, FHA, and building and construction loans.
This construction loan lender is also known for its convenient services, it lets you fill out the application form online without any hustle. However, the physical presence of NKBC is limited that creates troubles for its beneficiaries sometimes.
If you are willing to get some extra services like loan calculators, the NKBC is a good construction lender option.
Number Four: The Kabbage
Kabbage has made it to the list of top construction lenders following its below features:
- It is a reliable name to get several types of loans from. From business loans to personal and construction loans, it is the ultimate place for you.
- Independent contractors and contracting companies can get a credit of up to $150,000 following a simple registration procedure.
- Unlike other lenders, Kabbage doesn’t ask you to provide an excellent credit score. However, you must have a running business for at least 12 months to be able to get the loan.
- Once your loan application gets approved, the loan will be disbursed within 24 hours.
- You will be charged at flat fee rates and 10% APR lesser than many other lending companies.
Although this lending company provides several benefits, we must not ignore its drawback. And the biggest drawback related to this lending company is, it requires the beneficiary to provide a monthly $4,200 minimum income to qualify for the loan.
Number Five: The Quicken Loans
If you are looking for a mortgage or construction loan, Quicken Loans is another good option that offers multiple credit products. It is the most experienced lending company in the US, being founded in the year 1985.
It is known for its multiple credit options including, personal and commercial mortgages, home refinancing, construction, and personal loans. Its home loan products offer adjustable, Flat, and jumbo rates on the finances. If you are willing to build your own house, Quicken Loans is a good option for you.
The application process to apply for the loans also is quite convenient. You can apply for your construction loan on their online portal and if your application gets accepted, the company will disburse the loan within a matter of few days.
The only drawback we found worth mentioning here is, the company hasn’t a physical presence. It is purely online. Also, Quicken Loans doesn’t offer home equity refinancing, which is why the company ranks at number five in our list of best construction loan lenders.
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The Bottom Line
Although construction loans can be pure bliss if you want to construct your dream project but remember that, these loans are balloon mortgages and you are required to pay them back by the time your project completes.
After completion of the project, it is a good strategy to apply for an end loan and get yourself enrolled for a long-term mortgage plan.
