In the banking industry, there is the concept of commercial mortgage lending. What this means is that someone uses commercial buildings and/or property as collateral for getting a loan. Usually commercial mortgage lending is sought out by a business or corporation and not by an individual, but it is not unheard of for an individual to take out this type of loan – especially if they are a wealthy individual who owns several businesses. The way in which this type of loan works is slightly different from personal mortgages. While the entity who took out the loan would have up to 30 years to pay it back, there is usually a time before then in which the remaining balance would be due, which is called a balloon payment.

To make the concept of commercial mortgage lending a little easier to understand, let's look at it this way: Say you have a loan with a 20 year repayment schedule, but there is a balloon payment due at year 10. You will pay your scheduled payments every month up until year 10. Then, the remaining balance and interest will be due in full, even though you were on a 20 year repayment schedule. You have three options at this point. You can either pay the remaining balance in full, refinance the loan, or you can sell the property and repay the loan. Either way, you have to do something. This is just the way that commercial mortgage lending works. Residential construction loans are another aspect of the banking industry. These are pretty self explanatory: they are the type of loan you get so you can build a house to live in. You can also get residential construction loans to renovate an existing home.

Either way, some sort of building has to go on in order for you to qualify for this type of loan. If you are building a house from the ground up, then before you go in to apply for the loan, you need to have a detailed and itemized statement of all costs associated with the building. You need to have the cost for the contractor, laborers, materials, fixtures and everything else before you can even begin to know how much you need to borrow. Something that you have to keep in mind when applying for residential construction loans is that you need to have a good credit score and history in order to get the best interest rate – or even a loan at all.

Usually building a home from the ground up is a costly endeavor, so if you have bad credit you will be less likely to qualify for residential construction loans. If this case applies to you, then you will need to either wait until you can get your credit score back up or seek out an existing home loan.