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/
Wednesday, July 18, 2007
Tuesday, July 10, 2007
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
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.
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.
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