Who Qualifies for a New Construction Loan? #
Qualifying for a new construction loan depends less on a borrower’s personal income and more on the strength of the project itself. Hard money lenders focus on feasibility, projected value, and the borrower’s ability to execute the plan. While requirements vary, there are common factors that most investors should expect when applying.
Core Qualifications Lenders Look For #
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Experience and team support: Investors with prior construction or development experience are well positioned, but even first-time builders can qualify if they work with licensed contractors and an experienced general contractor.
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Credit and financial standing: Hard money lenders are more flexible than banks, but most still look for a minimum credit score around 620 and evidence of financial responsibility. Liquidity and reserves to cover carrying costs and contingencies are often required.
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Project feasibility: A detailed construction budget, timeline, and scope of work are mandatory. Lenders also review permits and zoning to ensure the project can proceed without major roadblocks.
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After-completion value (ACV): Appraisals or broker price opinions establish the property’s projected value once finished. Loan amounts are typically structured as a percentage of cost or ACV.
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Exit strategy: A clear plan to repay the loan, such as selling the finished property or refinancing into long-term financing, is essential.
Additional Factors That Can Strengthen Approval #
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Partnering with experienced builders, architects, or property managers.
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Demonstrating a track record of successful real estate investments, even outside of new construction.
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Choosing projects in strong markets with proven demand.
Summary #
Investors who qualify for a new construction loan are those who can present a feasible project, adequate financial reserves, and a clear exit strategy. While experience helps, lenders often place greater weight on the numbers of the deal and the professionalism of the construction plan.