New Home Construction Loans,
Information and FAQ
Home construction loan budget and the draw process
are handled pretty much the same way by most programs.
Here we present the entire process in an faq format
as well as a series of useful articles.
Construction Loans, an overview.
This
type of financing differs from regular purchase money or refinance
home mortgages in the way the loan amount is calculated and the way
it is structured.
Before
calculating the loan amount, we need a basic budget.
The
main components of construction loans that are included in
the
budget are:
1-
Soft
costs; consisting of architectural plans, engineering and permit
fees.
2-
Hard
costs; which are all the actual physical costs of construction.
3-
Closing
costs; consisting of origination and lender fees, title, and closing
fees.
4-
Inspection fees.
5-
Reserves; consisting of interest reserve and contingency reserve.
6-
Existing
lot pay off.
Regular
purchase money or refinance mortgages are based on Loan to Value
Ratio (LTV). Where as, construction loans are based on LTV as well
as Loan to Cost Ratio. Further more in a normal mortgage the closing
costs are added on after calculating the Loan to Value, whereas a
construction loan is inclusive of closing costs.
What
makes the whole thing more complex is the fact that the way these
numbers are calculated or the way the numbers are put together
differ from one investor to the next.
In
fact the calculations get complex enough that most loan officers in
most lending institutions don’t even know how to calculate a loan
amount, which results in last minute unpleasant surprises.
The
problem most applicants of construction loans face is when at
the 11th
hour they get a call informing them of the final loan amount
as calculated by an underwriter which may not be sufficient
to meet the borrower’s needs.
At
Construction Loans FAQ we specialize in this type of financing. Our
familiarity with the guidelines of construction loans offered by
most major institutions makes it possible for us to choose the
program that best suits you and your project.
Since
we are approved brokers with all these investors, the cost of the
loan to you is either the same or sometimes even better than
applying directly.
New Home Construction
loans are a specialized field:
And
as such we assign you an
expert consultant from the moment you apply. He/She will work
with you from the very beginning until the funding day, making
the process smooth and seamless.
For
Detailed FAQ on the entire process including Draw and Budget please
go to the:
Construction Loans FAQ
page.
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Started Now! Click Here!
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