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Residential Construction Project - Frequently Asked Questions (FAQ's) |
FAQ Information Directory
*** What states do you currently lend in? ***Only California. *** Do you lend to entities? ***Yes, rehab lenders, construction lenders and commercial lenders prefer to lend to entities. Some will require a personal guarantor. *** Is there an appraisal fee? ***Yes, every loan will require an appraisal which is to be paid by the Borrower prior to loan commitment. Lenders want to be sure of the value before giving final commitment. *** How long does it take to close? ***
Bank loans can take 4 to 5 weeks. *** Do you have Prepayment Penalties? ***Seldom, but some lenders (very few) have an exit fee. *** What are your typical rates and terms? ***
Rates at Banks are: 4.5% to about 6.0% and from .5 to 1 Lender Points. *** Do you offer loan extensions? ***Most Lenders will write the loan for at least 12 months, maybe 18 months and allow for 6 month extension for a fee. *** What type of credit score to you require? ***Most Lenders are looking for a FICO of at least 680, but some may require above 700 or price the loan higher or add Lender Points. *** Is a personal guarantee required?***If title is being held in an entity, some Lenders will want a guarantor, if title being held personally, a guarantor is of course part of the loan. *** Can I make interest only payments? ***Most Lenders use interest only terms for short term loans. For loans of 3 or more years, the loan may be amortized and require some principal payment. *** Is there an application fee? ***A few Lenders charge a small application fee on the order of $2,500 during the application submission process, most do not. For Lenders that do have the fee, it is not refundable if the loan is not granted. *** What types of properties can be used as collateral? ***Typically any residential or commercial property with sufficent equity can be used as collateral which places liens on both the subject property and the cross collateral property. *** Do you lend based on ARV? ***Most rehab and construction loans are limited to 65% or 70% LTV (Loan to Value) and about 80% LTC (Loan to Cost). *** How do you determine LTC? ***LTC is determined by adding up the Soft Costs, Hard Costs, Closing Costs and Carrying Costs and comparing to the Loan Amount. *** Do you require construction control on construction loans? ***Almost all lenders use a third party Construction Control Company to perform inspections of the property prior to issuing a release of construction funds. Some use and inhouse inspector. *** How much down payment is required? ***It is more about equity in the deal than down payment. Banks do not allow for as much leverage as other Lenders. The key for construction loans is staying within the LTV limit and the LTC limits. For income producing properties, 80% loans are common. *** Can Interest Reserves be included in the loan amount? ***Most lenders prefer to have the Interest Reserves built into the loan to insure that the payments are made on time. |