Construction Financing (Spec Homes)

Are you a home builder seeking construction financing for spec homes?  We can help with the financing for your construction costs and again with our Seller Assisted Financing package for your buyers.

Here's what we look at initially:

• How much was the property purchased for and how long ago? Or, how much will it be purchased for?
• How much will it cost to build the home?
• How much will the home be worth at completion?
• How much do you have in reserves (liquid assets)?  You'll need 10% of the loan amount plus the amount due at closing.
• What is your credit score?  Must have 680 or higher (lender will consider 620-679 on an exception basis and an additional fee will be charged)

We can take an application over the phone, you can download one here, or complete an application online at your convenience.

Builder Requirements:   

• approved builder has to be one of the guarantors on the loan
• builder must have a minimum of five years experience in the building and marketing of homes (exceptions can be made concerning the amount of experience in marketing, depending on mitigating factors)
• licensed for two years (if required in your state)

Rate, Term, and Fees:

• 1% origination plus $2,500 in operation costs (this covers all inspections and disbursements)
• third party fees, appraisal, title, and property insurance (we can provide an estimate once we determine the loan amount needed)
• only 4 loans at one time
• total portfolio can only go up to 2.0 million or up to 2.5 million as an exception

Interest Rate:

7.5% is the start rate (for the 12 month term) for the first month. After the first month the rate will become fully indexed.  The 12 MAT will adjust each month.  The first and periodic cap is 1% (period is one month) with a life cap of 6%.  The caps do not offer much security; however, the index is very stable and at most should only rise around 1-2% in a year’s time (speculation based on current trends).  Keep in mind that this is interest only on what is drawn from the loan, not on the loan amount. You can take a look at the history of the 12 MAT (otherwise known as the MTA) at this link.