Residential Construction Loans
Today's modern day construction loan is usually a one-time close, one set of loan fees construction to perm or permanent loan. The construction loan includes the construction loan period and long term financing to build a dream home in California.
Construction Lending Features:
- Lot Loans
- Construction
- Demo & Rebuild
- Remodel
Construction financing $400,000 to $5,000,000 standard and up to $10,000,000 for High Net Worth individuals.
Lock permanent loan up-front for up to 24 months on 30 Year Fixed Loans and ARM loan products.
Construction Loan Highlights
Construction Loan Overview
- One Time Close/All-in-One Construction to Permanent Loans – 30 year fixed loan term, or fixed for the first 5, 7 or 10 years. Allows you to “Lock-In” a single low rate before construction begins.
- Finishd Value or “As Completed” Loans – Loan amounts are based on the finished value of the completed project and not on the Project Cost itself. This means significantly less “cash out-of-your-pocket” and more toward covering 100% of your construction costs.
- Pre-Start Construction Loans – Loans for projects already under construction or partially complete projects.
Underwriting Flexibility – We partner with various funding sources for our Lot and Construction financing. Here are just a few of the many circumstance where other lenders may say no where we can offer a solution.
- Finance up to 100% of the cost of construction
- Use the Construction Loan to also pay off all the of the existing loans
- Loan amounts based Finished Value or As-Completed Value of the home, not the Costs
- Vacation or 2nd Home
- Vacant land over 10 acres or land using well water or septic sewage
- Residential land loans to $2,000,000
- Construction-to-Permanent loans from $400,000 to $10,000,000.
- Pre Start Projects OK.
- Projects where work has stopped completely for years
- Severely damages structures, including fire, earthquake and flood
- Properties that will be owner-occupied or 2nd homes
Purpose of Construction Loans
Purchase, finance and cash-out refinance
Products/Pricing
Construction phase: Interest only based on the amount disbursed. Permanent phase: Lock First allows the permanent financing to be locked prior to beginning construction.
Processes
Standard (Full Doc)
Occupancy
Primary residence, second home, investment (rental) property.
Property Type
New construction, remodel or rehabilitation of: Single family residences, 1 to 2 units.
Construction Loan Terms
Construction phase (months) 12, 15, 18 and 24.
Interest Rates
Our lenders all offer different rates and programs depending on your qualifications and loan size. Our goal is always to make sure your loan request goes to the best lender.
Contingency Reserves
Required and or Optional depending on the lender, standard. 5% on Ground Up and Non-Structural Rehabs. 10% on remodels. Can be waived under certain circumstances.
Owner/Builder
By exception only. Owner/Builder requires a licensed contractor as a project manager or a resume of construction experience. Specific requirements apply throughout the construction phase regarding the Project Manager's responsibilities. Most lenders allow an a licensed contractor to be an Owner Builder.
Draw Allowance:
Construction term: <=6 mos.: 5draws, 9mos.: 9 draws, 12 to 15 mos.: 14 draws, >=18mos.: 18 draws. Additional draws can be purchased for $100/each
Appraisals
For loan amounts greater than $2,000,000, 2 appraisals are required. Appraiser must be on the lender approved list.
Pre-Closing Asset Accounting
In addition to brokerage accounts, retirement accounts, bank account balances, etc., recent (within 24 mos.) payment toward lot purchase, and prepaid expenses for hard and soft costs related to the project can be considered as pre-closing pre-paids towards equity down payment (if properly documented with receipts and cancelled checks).
Modified/Standard (Full Document)
Purchase and Rate/Term Finance
| Primary | LTV | Loan Amount | FICO |
| 80% | $1,000,000 | 680 | |
| 80% | $2,000,000 | 700 | |
| 75% | $2,000,000 | 700 | |
| 70% | $3,000,000 and above 60 to 70% | ||
Credit Score and Qualifying Ratio Requirements
| Conforming | FICO | Max Ratio |
| Salaried | >=700 | 50.00% |
| Self-Employed | >=700 | 43.00% |
Preferred Documentation Features
Salaried (two year work history required)
1 YTD pay stub (most recent computer generated), 1 W-2 Form (for most recent year)
Self-Employed (Borrower owned for 2 years minimum)
1 year 1040 (pages 1 & 2 only of most recent year), Sched. A required for commissioned income.
Required: Business Returns, K-1s, Balance Sheet, P&L.
Bonus/Overtime
Same as Salaried. Average of YTD & W-2
