A SPEC construction loan is an interim construction loan only, and not the permanent financing because the exit strategy is to sell the property. “SPEC” here is short for “speculating”, because the builder or investor is speculating that they can sell the property at a profit. For this reason, the builder or investor is […]
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We can do a lot loan in California for up to 80% of the purchase price of a vacant lot. The lot should be less than 10 acres, although slightly larger parcels may be acceptable if in a subdivision of similar parcels, and vacant lots of similar size have sold recently in the area. No structures
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This is a bad idea for many reasons, but sometimes borrowers must start due to the permit process. If this is the case, and you have to start grading, and maybe have to do the foundation, we would suggest a separate contract with the builder. Contact a local office of First American, Fidelity or another
Can we start construction, and then get a construction loan later? Read More »
We can do a refinance of a vacant lot on Lot Loan Program #1. There can be no cashout, so we can only refinance your current balance plus closing costs. This also means no money for plans, permits or construction on a lot loan refinance, even if you are not walking away with cash. A
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A contingency is an addition to the cost breakdown, usually based on a percentage of the hard costs, to be used to fund changes during the build. For example, the borrower decides half way through the build that rather than granite tile, they want granite slab in the kitchen. They can either pay that out
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An interest reserve account is another line item in the cost breakdown that is used to pay interest during the construction period. A construction loan with an interest reserve account essentially uses borrowed funds to pay interest on itself. Interest is estimated based on the expected rate during construction, the expected construction period, the loan
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All bank construction loans disburse money subsequent to the work being done, and interest is charged just on the amount disbursed. Some private money construction loans charge interest on the entire loan amount from the date of funding, but banks can’t do that. In the past, there were some construction lenders who would impose a
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Assuming there is no question of occupancy on the new home to be constructed, if you earn enough income to cover the PITI (principle, interest, taxes and insurance) on both homes, the answer is no. Even if you can’t cover both payments with debt ratios that meet program guidelines, you may still qualify. Before the
Do we have to sell our current home to qualify for a construction loan? Read More »
For a construction loan, the appraisal is done from the plans and cost breakdown. To call it a “future value appraisal” is a misnomer in some ways since the comparable sales reflect the current market, and no attempt is made to peek into the future. The appraised value should reflect what the property would be
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