Construction lenders will lend off of what the house will be worth when completed.

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 the appraised value as completed gave them the loan-to-value ratio for which they were looking.  This was even done on stated income loans.  Since mid-2008, we’re back to where we were a decade ago such that construction  lending is now done based on the lesser of two numbers.  One number is total costs (lot price or value, plus prepaid soft costs, plus construction hard costs) and the other an appraised value as to what the house would be worth in today’s market if completed already as planned.

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