U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 04-29-2010, 07:08 PM
 
1 posts, read 5,618 times
Reputation: 10

Advertisements

Excellent Single Close Construction Loans do still exist, although the banks that accounted for 90% of the construction loans 2 or 3 years ago are either closed, or their construction loan programs have been cancelled. 80% of the lesser of total costs or the as completed appraised value is currently the most aggressive construction lending for owner occupied, single family residences. There are still some programs with excellent pricing from a few multi-state banks. These are banks that didn't get killed in the era of wild, stated income construction lending at 100% of costs. Borrowers these days must have full income and asset documentation, excellent credit, and a fixed price contract with an approvable builder.

Last edited by Green Irish Eyes; 04-30-2010 at 01:54 PM.. Reason: Please review the Terms of Service -- members with fewer than 10 posts may NOT make recommendations.
Reply With Quote Quick reply to this message

 
Old 04-29-2010, 07:57 PM
 
Location: State of Superior
8,633 posts, read 14,357,900 times
Reputation: 2778
Quote:
Originally Posted by timjarvis View Post
Excellent Single Close Construction Loans do still exist, although the banks that accounted for 90% of the construction loans 2 or 3 years ago are either closed, or their construction loan programs have been cancelled. 80% of the lesser of total costs or the as completed appraised value is currently the most aggressive construction lending for owner occupied, single family residences. There are still some programs with excellent pricing from a few multi-state banks. These are banks that didn't get killed in the era of wild, stated income construction lending at 100% of costs. Borrowers these days must have full income and asset documentation, excellent credit, and a fixed price contract with an approvable builder.
That lets out most of the people, including myself,.... going it alone , one month at a time, my third year, will finish this fall, i hope. Cash is king , do not leave home with out it.....

Last edited by Green Irish Eyes; 04-30-2010 at 01:55 PM.. Reason: Deleted non-approved link from quoted text.
Reply With Quote Quick reply to this message
 
Old 04-30-2010, 08:21 AM
 
3,576 posts, read 6,240,484 times
Reputation: 1432
Be very careful of construction loans, especially in this economy.

Our mutual friend just lost 250K of his hard earned money when the small builder/owner screwed him over. Basically liquidated all of his money and filed for bankruptcy. This crook essentially stole most all of this money.

They paid 200K for the land already and were building over a 1 million dollar home. The builder wanted 20% down.

Their dream home sits 1/3 completed. It's a complete mess. The guy fled and supposely has no assets. The guy/small builder was supposed to show the bank the money. No one at the bank cross checked where the money was going. Someone messed up and he really just ripped them off.
Reply With Quote Quick reply to this message
 
Old 04-30-2010, 11:19 AM
 
Location: State of Superior
8,633 posts, read 14,357,900 times
Reputation: 2778
Quote:
Originally Posted by aneftp View Post
Be very careful of construction loans, especially in this economy.

Our mutual friend just lost 250K of his hard earned money when the small builder/owner screwed him over. Basically liquidated all of his money and filed for bankruptcy. This crook essentially stole most all of this money.

They paid 200K for the land already and were building over a 1 million dollar home. The builder wanted 20% down.

Their dream home sits 1/3 completed. It's a complete mess. The guy fled and supposedly has no assets. The guy/small builder was supposed to show the bank the money. No one at the bank cross checked where the money was going. Someone messed up and he really just ripped them off.
A lot of the blame here goes to the Bank. Most banks will only approve a construction loan if you are using a Contractor on their list. The Bank makes money on the construction loan, and sometimes their are commissions ( kick-backs) to the bank and builder interest....Insurance can involved ( bond ) to protect the consumer, and the bank. The Banker should share in the loss, usually does in most cases when there are built in protections.
I agree however , construction loans are mostly a bad deal. You are better off securing private , or personal financing in Lew of a construction loan. Then you can oversee the building yourself, even be your own General Contractor , and save thousands of dollars in add on, rebates , and lost interest as well as mark-ups by the builder for materials. Bottom line , all expensive home builds should be bonded. Custom home builds can be just as complicated as any comerical build, you should treat it that way.
Reply With Quote Quick reply to this message
 
Old 07-17-2012, 09:34 AM
 
Location: Vermont
5,441 posts, read 15,245,985 times
Reputation: 2641
Can someone clarify what you normally would need for a construction loan?

Let's say land is paid for.

Example: Home is 100k and site costs 50k. Will 20% of 150k suffice?

When it is all done, then I get a mortgage for 130K (150k - 20%) ???
Reply With Quote Quick reply to this message
 
Old 07-17-2012, 12:32 PM
 
Location: State of Superior
8,633 posts, read 14,357,900 times
Reputation: 2778
You have it sorta backwards. A construction loan ( if you can get one ) is based on the estimated cost to build it, from a licensed contractor in your area, that works with the bank, IE; they know each other by past performance.. than they know you.If your land is paid for so much the better, however most land has little value alone when it comes to a bank loan. The bank will look at your credit, and the contractors estimate for building. The Contractor will get draws as needed during the building process.You will be required to have an account in the bank you are borrowing from, you have to sign off on every draw from the loan account, so does the bank. In most cases the amount you can borrow will be determined before the construction loan. Sometimes things do not go as planed, and most times your cost will grow as the building goes along, some from the low ball bid from the contractor, but mostly from adds you want, which is called a change order.
Basically there will be a time limit to get the house built, set by the bank...Once the house is finished, and there is a CO issued by the county or city involved,the construction loan will be folded in to a mortgage . The Bank may want the new structure to be apprized, sometimes not, as once you have been approved by the bank for the construction loan you are also approved for the final mortgage The bank will work with you as to equity at time of contemplation, final cost based on contractor draws, and the apprized value of all land,home,cost to build ,as well as current interest rates. It is rare for the Bank to lock in interest on the final deal, but it does happen. If you own the land free and clear, and its value alone ( based on values on your street or area) covers the down payment then the mortgage will be based on the final amount of worth, completed house w/ land . Your land has little or no value without a dwelling on it.
For the average person , you would be better off to purchase a home completed by a developer or planed for anyway.There are many of unknowns, one reason banks are shy about giving out construction loans to all by their most wealthy customers.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top