How to select a Builder

Choosing the right builder is just as important as choosing the right lender. Your builder needs to be an experienced professional with a proven history of delivering a high-quality product on time and on budget.



Where do you find a builder?

Begin your search with family and friends who know people who have recently built homes. Professional organizations like your local Home Builder Association are also good sources of builders in your area. Ask a local real estate agent familiar with new home construction in your area. Drive around and note the builder's name on a project that appeals to you. Once you narrow down your selection, ask for references and estimates. Just remember that the lowest estimate is not always the best deal. If licensing is required in your state, be sure to select a licensed general contractor.


How do you know who is a custom home builder?

There are two types of home builders-custom builders and production builders. Unless you decide to purchase a home in a new housing tract where the homes are built from a single, large volume production builder, you'll want to work with a custom builder.

Custom builders:
Typically build on land you own
Specialize in one-of-a-kind homes from plans designed by an architect or designer
Build single-family homes, both primary residences and second homes
Typically build fewer than 25 homes a year
Tend to build luxury, high end homes

Happy building,
Troy Schuricht
troy@cffinfo.com
480-305-8905
http://www.communityfirstfinancial.com/

Major Home Renovation Loan (Rehab Loan)

Rehab and Renovation
Maybe you like the location, but not the home. Maybe you like the house, but not the kitchen. Maybe you like the home you live in, but want a bigger one. Use of a construction loan can help you build, rebuild, remodel or rehab any home you choose. Most work can be completed cheaper than you would think.
Heres how it works:
The loan is based on the value of your home AFTER the renovations are finished. This gives you the flexibility to make your home into more than you could with just your current home equity. During construction, the loan is a line of credit with interest-only payments due on the outstanding balance. When the renovations are complete, the loan converts to a conventional mortgage. If you need to move out while your home is being renovated, we have a "no-payment option" during the construction period to help you afford the increased housing expense.
Other great features of a Major Renovation Loan include:
A contingency reserve to cover plan changes or unforeseen circumstances. A single loan structure with only one settlement- a feature that could save you hundreds of dollars in settlement costs.










Happy Buildling,
Troy Schuricht
COMMUNITY FIRST FINANCIAL, LLC
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 - office
480-393-8801 - fax
http://www.communityfirstfinancial.com/
http://www.yourlendertroy.blogspot.com/
http://activerain.com/tschuricht

How to Help Your Customer Feel More Comfortable With Construction Loans

What are the reasons people buy resale homes over building thier own custom home?
Tangible product. They can see, smell, touch the new home they wish to buy.
Time line. Most resale homes are available with in 45-60 days.
Inventory. Easier to find an existing home rather than a vacant lot.
Variables. Building requires: Realtor, land, builder, plans, options, time, patients, vision, trust, etc....
Education. Many home customers that build homes invest more time into their "purchase" and at the same time have to educate themselves with land, building and builder.
This list can go on all day long, but the theme of the idea is HOW DO WE HELP OUR CUSTOMER FEEL MORE COMFORTABLE WITH THE CONSTRUCTION PROCESS AND THE CONSTRUCTION LOAN?
This idea is geared towards custom homes. Production builders actually do a fine job at this and custom builders and their customers can learn a lot from their presentation of information. Only if there was time, money and resources to emulate their marketing. So what can you do?
What can be done is education. If you are a builder, developer, or Realtor here are a few ideas:
Make sure that prior homes built can be used as sells tools for your future customers. I own a lot today because I walked in to a spec home that the builder was working on and fell in love with the home. The General Contractor happen to own the lot next door, now I do.
Use the web. Show case every home you have ever built. People love pictures. Remember you have no models to show case like production builders.
Choose the advisers you and your customers use carefully. Make sure your Realtor is a pro with the custom home building process, same with your loan officer, architect, and any other support. The very best advisor's have experience and know how.
Make sure your advisors are web based. Meaning, If I tell a customer AHK Contracting is great. My customer can actually go their website and get some level of comfort with their experience. I will use myself as an example too. I am a construction loan specialist. I can help you be more comfortable with this by my websites: http://www.communityfirstfinancial.com/, http://www.cffinfo.com/, http://www.yourlendertroy.blogspot.com/, http://activerain.com/troyschuricht. These websites share testimonials, credibility and education specifically on construction loans. Everything matters in the technology based society we live in. And people love to research things they do not know, especially things like construction loans.
Referrals, testimonials and past clients. Gather as many other peoples opinions, ideas, and experiences. We all love stories and we should try and share them.
Many custom home customers repeat the process, because they feel comfortable with the process, see the value , and love the feeling of building a vision.
My formula for success: EDUCATION+ADVISOR'S=COMFORT
Happy building,
Troy Schuricht

Is hard money a good source for construction loans?

Is hard money a good source for construction loans?
In my opinion using other peoples money to finance real estate is an aged old tradition. And it is true for construction loans as well. There is a great book written by Michael Lechter, my business partners father, called OPM "other peoples money". http://www.mlechter.com/ Keep in mind that when you spend other peoples money there are costs to that transaction. Hard money on the surface seems to come at a greater cost in both fees and interest rate. But if used properly, hard money can keep your own money in your pocket or in other projects. I am interested in hearing from a few hard money lenders. I may have customers for OPM.
A hard money loan is a specific type of financing in which a borrower receives funds based on the value of a specific parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution. Hard money is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and not yet qualifying for traditional financing. Whereas hard money often refers to not only an asset-based loan with a high interest rate, but can signify a distressed financial situation such as arrears on the existing mortgage or bankruptcy and foreclosure proceedings are occurring. Source: Wikipedia®

Best of Luck,
Troy Schruicht

How Long is the Construction Loan Process?

How long is the construction loan process is a question I get a lot. To answer this question a person has to first figure out when the construction loan process actually begins. Construction projects can literally take a year to develop. Finding land, creating plans for the build, choosing a general contractor, filing for permits, etc..., are all item out side the construction loan process and actually need to be figured out before you start the construction loan. Of course at some point during the initial phase you should secure an experienced loan officer that has completed no less than 25 projects. This kind of experience saves time during the loan process and can help guide you through the numerous questions during pre-loan phases.
Back to the question how long???? 30 to 45 days, tops
Here is what you need to prepare in order to have success:
Plans and Specs
Contract between you and the General Contractor
Know about your insurance responsibilities (contact insurance agent)
Have Asset statements together (last two months)
Documentation for all items paid during initial phase (architect bill, permit receipt, etc...)
W2's, Tax returns, Business license, financial statements (Documentation to prove income)
No doc loans available (at a premium to rate and cost)
Cost break down of build
Signed good faith estimate (know what loan you are getting into)
This list could probably go on, but with these items a qualified individual can get your loan into processing with in a couple of days and should have everything in line to close within 30 days.
For the record:
My quickest close, 8 business days on a construction loan.
Keep in mind there can be headaches for projects that are trying to be done at a 100% financing. Every loans is a little different so be prepared.

Best of Luck,
Troy Schuricht
wwww.communityfirstfinancial.com

Construction to Permanent vs. Construction Only

What is the difference between "Construction-to-Permanent" and "Construction Only" loan programs?
A C/P or Construction-to-Permanent, also called "One Time Close" is a type of construction loan that rolls directly into your permanent financing once your home has received its Certificate of Occupancy. Typically, the borrower qualifies for the loan to the guidelines of the permanent loan. The borrower can select whatever end loan program that a lender may have in their portfolio (ie. 30 year fix; 3/1, 5/1, 7/1 ARMs, Interest Only, 15 year fix, etc.). The construction period is the riskiest part of the loan. Thus, lenders will charge a little more in fees to administer the loan and a higher interest rate during this period. Once the home is complete, then what has been actually used from the construction loan will convert into the principal amount of the permanent financing. Lenders who offer a CTP program typically do so because they want your permanent loan. Once the home is built, the lender now has a secured asset for their loan.
A Construction Only loan is obviously a construction loan only for the purpose to build the home. Once the home has been completed, the borrower is responsible to find a permanent loan to payoff the construction loan. In today's market, the construction only loan is mostly used by builders who build a home with the purpose to sell and owner occupied borrowers who have credit challenges.
Why would someone want to use the "Construction-to-Permanent" loan?
One set of fees. With the C/P loan, the lender will charge only one set of fees for the loan.
No worries about pre-qualifying for a permanent. When you are approved for the construction loan, you have been approved for the permanent loan.
Competitive pricing. Those lenders in the C/P market want your business. Thus, the lenders are trying their best to make their programs competitive.
Why would someone want to use the "Construction Only" loan?
Planning to sell the home during or immediately following completion. These loans are designed to be reimbursed by either a mortgage from a buyer of the home or a refinance.
Experiencing credit challenges. Typically, borrowers who have a mid-FICO (credit) score of 620 or below will not qualify for a CTP loan and must look to the Construction Only products.
You want a specialized permanent loan. Sometimes lenders who offer C/P programs do not carry the type of permanent loan that you desire. If this is the case, the borrower may have to go to another lender for the specific loan program that they desire.
If you have any further questions regarding this topic, please feel free to call us at 480-305-8905.
Troy Schuricht-Construction Loan Specialist

Troy Schuricht
COMMUNITY FIRST FINANCIAL
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 - office
480-393-8801 - fax

GO TO: http://www.communityfirstfinancial.com/

Q & A for Construction Loans:

The format for discussion is very simple. Ask a question concerning the construction loan process and get the answer.

This format is great for Builders, General Contractors, Realtors and Borrowers to get immediate feed back on their direct construction question.

Examples of questions:

Q: John LotOwner - I own a lot free and clear. Is there a loan that allows me to take cash out?
A: There are two types of loans that might be able to help. There are lot loans that allow you to refinance and take cash out. You could also do a construction loans and get cash in hand at closing of the loan.


Q: Suzie HomeBuilder – Will stated income loans be offered in 2008?
A: YES, YES, YES 2007 has not be a good year for stated income loans, but most local lenders and banks remain strong with stated income. Look for borrowers to document more assets.

Home Loans - Back to Basics

A lot of the national headlines of the mortgage industry can give a person a very empty feeling. With the count of lenders that have closed reaching 115, see http://www.lendersimplode.com/, a majority of the public believes the mortgage industry is on the brink of collaspe. They believe this because they read headlines. Log on to your computer, open your news paper, ask your neighbor, all accounts point to failure in the mortgage market. American Home Mortgage just shut down, 10th largest mortgage company in the country, over 7000 employees with no jobs. There are up to a 114 companies just like AHM. I ask the question as to why? And is this really a problem?

Why are companies closing down?
1. Greed. Most companies leveraged themselves to try and take advantage of the profitable mortgage business, and when the investors said no thanks companies are left holding the bags, out of business.
2. Greed. A number of these companies disregarded the fundamentals of mortgage underwriting and where faced with buying back loans underwritten on their wholesales lending lines of credit.
3. Greed. When you put a customer in a home with no money down, that home is losing value, the customers credit worthiness is in question, it makes for a dangerous combination. This was done time and time again over the last few years. The companies doing these loans, see lenderimplode.com

Is this a real problem?
1. Yes- In the short term, 1-2 years, people will loose the money they had invested in the AHM's, jobs will be lost, peoples will not be able to keep there homes, and others will not qualify under new guidelines for future home purchases.
2. NO - Those new guidelines I just mentioned are actually the guidelines from 5 years ago. The guidelines before too many companies got carried away with GREED.
3. NO - It is back to basics for all of us.

My business partner, Phil Lechter, worked at the Rich Dad company for 7 year before we created Community First Financial. If you know anything about the Rich Dad company and the books they have written you understand what basics are, but let me brief them for you.

What are Basics?
Educate your self about the process of buying real estate.
Build your team of advisor's to help you with the process.
Identify the correct properties at the correct prices
Have yourself ready to buy- financially, emotionally, and physically.
Continue your education of real estate

Best of luck in your real estate adventures.

Troy Schuricht
http://www.communityfirstfinancial.com/

The Challenges of a Construction Loan

People often ask me why construction loans are so difficult? One would think this is a question a potential client, building their first home, or maybe a Realtor new to the construction arena would ask. Unfortunately this question I get asked most by colleagues in my profession. Loan officers, processors, and senior loan managers are just a few that are confused by construction loans.
Let me give a little insight to why construction loans are very difficult to figure out (even for those in the mortgage profession).
There are more variables to consider.
Is the land already owned? If so when was it bought, how much, and what is the value?
What are the soft construction costs?
What are the hard construction costs?
Have any items been prepaid?
Do you have a General Contractor?
Is he approved to business with the lender?
Do you have plans?
Permits?
Any work started?
Do you have working capital?
Do you need an interest reserve account?
Do you need anything refunded at close?
Do you know how many draws you need?
This list could go on and on. My point is the amount of additional work that a construction loan requires is much greater than your last purchase or refinance. Keep in mind the mortgage a typically person completes has close to 35 people touching that transaction. With a construction loan there are even more associated with your file.
If any of this has you scratching your head you are not alone. Construction loans are dominated by a few select individuals because they are a special transaction. If anyone needs any more insight to my comment please let me know.
Best of Luck,
Troy Schuricht
http://www.communityfirstfinancial.com/

How to choose a Construction Loan Specialist

How to choose a Construction Loan Specialist
How special are construction loans? In a report from Countrywide Home Loans, only 1 in 10 loan officers do more than 1 construction loan per year. So less than 10% do more than one loan per year, this makes finding a loan officer that is experienced with construction loans very difficult. Like all advisor's associated with real estate, loan officers should be interviewed by potential clients. Here are a few questions that individuals seeking a construction loan should ask their future loan officer candidate:
1. How many CONSTRUCTION loans do you close PER MONTH? - Experience is everything.
2. How many sources do you have for construction loans? - More sources = more options.
3. Can you provide testimonials and references? - Word of mouth from someone else.
4. Go on-line and do a little digging. - The Internet is a great tool for information.
5. Be-careful about on-line applications for construction loans. - Most sites are lead sites and not actual mortgage companies that specialize in construction loans. Your information is collected and SOLD.
Feel free to ask any question any time.
http://www.communityfirstfinancial.com/
http://yourlendertroy.blogspot.com/
troy@yourlendertroy.com
Best of Luck,
Troy Schuricht

Competing vs. Colaborating

This has been a great lesson for me. I realized that I have grown in an environment that promoted competition instead of collaboration. One of the great opportunities that was presented to me recently required some initial hard money capital. Yet I am not a hard money lender and in the past I probably would have passed on this deal.

Well, I was talking with my neighbor (of all people) the other day to realize that he is a hard money lender. We are working together on how to best structure this deal where he can do the initial financing, and I can finance my neighbor out when construction is done. This is a win/win/win for everyone.

Who is the 3rd win for.....the customer as we may be able to do this with no money out of their pocket where in a 'conventional' sense they would have had to put down a minimum of 20%.

It is amazing how everyone can win if you are open to it.