Quick Question for those who took construction loans..
njbuilding143
9 years ago
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snuffycuts99
9 years agoSkie_M
9 years agoRelated Discussions
Construction Loan for Southern Indiana build
Comments (9)HoosierBred, I will let you know we just went through this entire process about 2 months ago, but we are located in Central Ohio. We went through First Federal of Lakewood, but I think they only service Ohio. It looks like you are going with local banks which from what we have learned is the best route because they offer the most competative rates! Our bank is giving us 1 year to complete our build, we closed on the loan on the 23rd of December. We ended up with a rate of 3.39% and that is during the build and will be our final rate after the home is complete. We wanted to get out of PMI with 10% down so they broke our loan into 2- which is 80/10 thats saving us 300 dollars a month on PMI. With our bank we did have to have a purchase agreement signed and the builder was involved with the financing because they had to have the floor plans and costs and upgrades so they could do a paper appraisal (this was a one time close.) The appraiser actually went to our builders model to see the finishes and the quality of build and our appraisal came in 57k over what we are paying for the home including land. Now also what I have found out is many places charge a higher interest rate during the build sometimes 5-6% because you are paying interest only during the build, and then will lock you in at what ever the current rate is at the completion of the home. I do suggest taking a look at many places and finding out how their programs are structured and then once you find one that works best for you then doing the application! We did look into farm credit, but their rates were higher thank FFL, and they required 20-30% down with a back end DTI of 36% and with our current car leases we were 3% away from that mark. As well we had 20-30% down but we wanted to set asside a bubble for overages and we are also wanting to put an inground pool in and didn't want to finance that portion because a pool really doesn't add much value, other than pleasure. Hope this helps some (sorry I am not in Southern IN) -Clayton...See MoreConstruction Loan, Bank says No way!
Comments (14)If I read your message correctly he may have offered you a better option than a construction loan. You stated that you need $100K to build given your other assets. He offered to loan you half the value of what state is an over $200K property you own free and clear. So if you take his loan you get a $100K check to put in the bank and pay your subs as you go. No bank draws to deal with, no bank inspectors to wait on. You also get to take advantage of cash discounts and incentivize your subs with quick payments. At the end of the build you would only need to refi if you wanted to pull equity back out to do other things. Otherwise you just pay off the $100K loan according to its terms. if you did need to refi I'm guessing the closing costs would be worth it, given the flexibility you would buy for yourself by avoiding a construction loan. I did my build similarly, although I was not positioned quite so favorably as you. I had enough cash along with a HELOC to build my new house on my property. It was very nice not dealing with a construction loan. At the end of the build I refi-ed and paid off the HELOC and the original first mortgage. The subs loved it when I pulled my checkbook out on the spot and handed them their money. Never underestimate the power of quickly paying quality subs for a job well done. You should reconsider what he offered. It may be a very smart way to go....See MoreRemodeling (Construction)Loan, Draws, and Who Pays (x-posted)
Comments (12)Most home remodels that are being done are with cash or HELOC's. I don't know of anyone in the past 18 months who has gotten a home remodel loan. Banks have gotten way too bit from "house flippers" who thought they could turn a profit by cheaply putting lipstick on pigs. Most will do HELOC's because the amount is smaller and secured by the equity in the home. A true home remodel loan will require extensive vetting by the bank and appraisers over the plans to be able to try and verify the value after the remodel as well as the reputation of the contractors involved so as to be sure of the completion of the project. It's part voodoo and part neighborhood value. And you should NOT put the cart before the horse on this by fronting any materials before the loan is approved. Because it may not be. However, once the loan is approved, you should pay out of pocket to get it started if need be. You should always have a safety cushion for those type of expenditures that the bank is hurry up and wait on. And at least a 20% cash cushion for overages. You will need that, and maybe more on older homes. Plus, the bank will have a difficult time approving a loan unless you can prove you really don't need a loan and actually have the cash or home equity to do the project outright....See Morejumbo construction loan with new construction ADVICE needed!
Comments (19)My husband and I ran into a similar problem when we had our big addition/remodel. What my husband did was contacted both the bank and the appraisal company and showed them our building plans and asked that they base the appraisal on the prospective build out. The bank worked with us. The residential lending officers actually visited our home on three separate occasions to ensure that we were in fact upgrading the home to the level we proposed we would, understandably they needed to ensure their money was going where it should be. So about midway through the project they increased our construction loan by 25,000, and 3/4 into the project they gave us the final 40,000 they agreed to lend us. This was still about 25,000 shy of our desired amount. In addition to our discussion with the bank, we sat with the contractor and asked where we could cut some corners. He offered us the opportunity to do some “homework” throughout the project which included cleaning up the work site at the end of the day ourselves and preparing the area for the following day, drilling holes in the framing to save a ton of time that we would normally pay the electricians 125 per hour to do, and the biggest savings was painting the house ourselves. You may not have the time or desire to do this much hands on but I gotta day not only did we save enough to complete the project, but we came in under budget enough to furnish a few of the rooms. Best of Luck!...See MoreMFatt16
9 years agoMFatt16
9 years agojeff2013
9 years agonjbuilding143
9 years agoMFatt16
9 years ago
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