Construction Loans

Would you like to get financing to build your own house to your specifications ?
Or are you a builder trying to build houses for your clients ?

Then a construction loan is what you are looking for. We offer construction loans.
Typically a new construction loan is for something over 150K in either renovations or construction cost.



You can either buy an existing unfinished home and finish it, or buy a land to build a new home, or build two , three or more houses in it.
You can even build several homes as longs as you have qualified buyers willing to buy those homes, and each buyer can get a construction loan for their house.
The money used to finance the construction will be from the buyers and each buyer can get a construction loan for their home. So that way you can improve your cashflow.

So how exactly a construction loan works ?

There 3 main things need to get approved:

The Project
The Construction Company
The client / buyer of the Finished Constructed House.

The plans for the construction has to be submitted to the lender for review and approval.
As well as the construction company has to get approved, and as well as the buyer of the house.

Once all of these three meet the lenders guidelines, then construction can begin assuming all city permits are approved.

If you are a single person building your home through a construction loan, once you get the details and blue prints for your project of what you want to do.
Then its time to look for a construction company that will do the work. Sometimes the construction company can help with the blueprint and design.

Once all 3 are main areas are approved, then: the loan is then given out in different phases to start the construction.
Construction can be 4-5 phases of construction, each phase gets reviewed by an inspector to make sure the work has been accomplished to release the money to the builder for the next phase.

Requirements

The project has to be finished within 11-12 month period. The sooner the better. Usually it can be finished in few months time, if done by a large construction company.
The construction company / builder of the project has to have experience in building houses, with a total of at least 10 houses built in the past.
Contact us for more details.

Typical Questions of New Construction Loans Conversions:

Can the buyer / future owner of the house do his own construction ?
No, the buyer of the property cannot do the own construction, it has to be done by a construction company with experience of 10 plus built houses.

When buyer gets a construction loan, do the buyers pay the Principal and Interest on the total loan for the Construction when the construction begins ?
No, only the money that has been used on each phase of the construction gets paid by the buyer as 'Interest Only'
For example if only 100k was used during phase 1, then only interest only on that first 100k will be charged to the buyer.
on 2nd phase, if additional 100k is used for phase 2, then interest only for the combined phase 1 and phase 2 is to be charged.
So only interest is charged only on the portion of money that gets used.

So when does the buyer start paying Principal and Interest Payments ?
After the project gets finished then the loan gets converted to a Principal and Interest Mortgage Payment , instead of Interest Only.
There will be no additional escrow or title fee charges, as all costs are calculated at the very beginning.

So does the buyer know what his Principal and Interest Payment are going to be after the project is finished?
Yes, since the loan is locked at the beginning of the construction phase, the buyer will know exactly what his Principal and Interest Payments will be at the end of the construction phase.
To that you will have to add city property taxes and hazard insurance, that may change as the city will re-evaluate the value to determine the appropriate real estate taxes.

Can i do a construction loan with only five percent as down Payment ?
Yes, you can.
There is of course escrow, title, appraisal, lender underwriting, and a construction company approval cost, as well as the costs associated with getting the designs and blue prints.
However, in terms of final Sales Price to Loan Amount, yes, you can do a 5% down, that is a 95% Loan To Value
That will qualify it as a conventional loan, and will be converted to a conventional mortgage loan at the end of the construction period.

What are the benefits for the builder?
This can better the construction company / builder cashflow as there will not have to be a 'commercial loan' financing to the builder to build the houses,
instead financing of the construction is done through the buyer, therefore better management of cashflow for the construction company.
As the construction company will not have to come up with the money to buy the land and obtaining financing for the construction.
End client / buyer gets what they want to their specifications, and construction company just builds. Money is released as each phase is completed.