To be an approvable builder, the builder must be a licensed GC in the state where the property is being built. They must have “happy homeowners” for references, presumably based on jobs similar in scope to the new construction project for which they seek approval. Vendor and bank references are sometimes required as well. A credit …
There are three basic approaches to home construction, site built, modular and manufactured. Site built homes, also known as “stick built” in the industry, are constructed entirely on the building site. Site built homes could be a panelized home, or a kit home, such as a cedar home or a log home. In the case …
How Methods of Construction Affect Construction Lending Read More »
The short answer is yes, you can get a construction loan to build a log home. We’ve done them. The problem is that the property has to be appraised, and it must be demonstrated that log home construction is common for the area. Unfortunately, the way that is demonstrated is with typically with at least …
There are two main elements of qualifying for a construction loan, the property and the borrowers themselves. In regard to the property, it should be an owner occupied single family residence (some programs allow owner occupied duplexes), or a second home. It should be clear from the circumstances that the borrowers intend to occupy the …
There is no universally agreed upon distinction in the industry. Our lot loan is generally a maximum of 10 acres. We can go to 20 acres if the property is in a subdivision of similarly sized parcels, as demonstrated by recent comparable sales of vacant parcels. On all lot loans, no structures are allowed on the property, …
What is the difference between a lot loan and a land loan? Read More »
A single close construction loan, also known as a one time close construction loan, provides construction funding and is also the permanent financing. This is in contrast to a more traditional interim construction loan which would require “take out” permanent financing to pay it off. Single close construction loans have two basic structures. Our construction …
Construction loan programs 1, 2 and 3 require a fixed price contract with the builder, and a cost breakdown to match. The concept of fixed price seems self-explanatory. Any builder profit is built into the bottom line. A “cost plus contract” involves the builder saying essentially, I will build the house for whatever the subs …
This is not a good idea. Historically, most construction lenders won’t touch a deal that has pre-started. Possible mechanics liens create title insurance problems. Best case, and at a minimum, the title company and lender would want construction to stop for the mechanics lien window of 60 days, after filing certain notices. The title company …
Starting construction with our own money won’t be a problem. Read More »
Between 2003 and 2008 this was true for many construction lenders. Construction lending had moved to where, if a bank was going to be competitive, they needed to ignore how much cash the borrower had in the deal, and just lend of the end value. Multiple construction lenders were doing 100% of costs as long as …
Construction lenders will lend off of what the house will be worth when completed. Read More »
Your vacant lot does not have to be free and clear. The current value of the lot is added to construction costs and prepaid soft costs. Total costs are then compared to what the house would be worth if completed already as planned, as demonstrated by an appraisal. Construction lending is back to the more …
My land has to be paid off to get a construction loan. Read More »