Getting the best deal to build your rental property works in the very same way you when negotiating for any sort of loan, particularly a mortgage used to buy and finance your home. Sometimes it can get rather confusing if you let it. There can be various indexes, margins and costs associated with thehow to compare constrution loans loan that will wind up creating more questions than answers.

When comparing different banks, you first need to establish a baseline from which to compare different programs from different lenders. Contact several different banks and ask for a construction rate at say 6.00 percent, or whatever the going rate may be in your area. You’ll get a standard reply but they’ll first want a little more information from you. Construction loans just like a mortgage can be risk-based, meaning those with more equity or better credit scores will receive the best terms available. They might first request a loan application from you but many times that’s simply a ploy to get you committed to them. All you want now is a rate quote so tell them your particulars, your down payment credit and so on.

Some who compare get too caught up on the index. The index is the centerpiece of an adjustable rate mortgage and an index is added to it. Indexes don’t have much of an impact when comparing one bank to another. All you want is the fully indexed rate, the rate on which your payments will be based upon. Regardless if the index is LIBOR centric or a 1-Yr Treasury, it’s the final rate that counts not the index.

Finally, whatever the rate, ask the bank use that rate then quote their associated fees. If the rates are the same from one bank to the next, it’s all a matter of choosing the lowest costs. You need to make sure the rates are the same by asking the bank to quote their best rate with no points then the bank’s costs. By keeping the choices all “apples to apples” the choice will be much easier to make.