The Real Reason Your Construction Loan Was Denied by a Major Lender
If your bank will not approve your construction loan, you may feel as if it’s because of something you’ve done. In reality, however, you are most likely part of a growing trend. We’re going to crunch the numbers for you to identify why you are not alone, and what you can do about it.
As the reports from the FDIC show, bank-approved real estate loans in general have been on the decline for years. The third-quarter report for 2015 shows that real estate loans accounted for less than 3 percent of all bank activity – that’s not much, especially when considering construction loans accounted for over 7 percent of all bank activity in 2010, just 5 years prior.
Using the FDIC report generator, you can see for yourself that the banks made over $3 billion in profits from real estate loans in the third quarter of 2015 (the most recent report available). However, of the $3 billion, construction loans only accounted for $249,000. This number is very small to begin with, but it is down more than $100,000 from the same time 5 years ago.
Bottom line, this trend shows that construction loans are simply not making enough money for the banks to take them seriously. They are too risky of an investment for banks, and the real estate market is not strong enough to guarantee a profit for the banks if they were to seize a property. As a result, they often won’t touch these types of loans.
Instead, banks want to focus on the largest construction contracts possible so that they can minimize the risk and generate the most money at once. Fortunately, you can choose to work with a hard money lender instead of wasting time with a big-name financial institution.
Are You a Real Estate Investor Who Needs a Hard Money Loan in Atlanta?
If you’re an investor who needs a hard money loan in or around Atlanta, we may be able to help you.
Call us at 404-814-1644 or get in touch with us online if you have questions. You can also apply for a hard money loan online, read our hard money FAQ or learn about our loan process.