Construction Loans are recourse in nature. The bank examines the equity in the land, the construction budget and the financial strength of the borrower to issue credit approval. A minimum net worth equal to the loan amount, good credit, liquidity, and a solid builder’s resume is key. Rates range depending on the financial strength of the sponsor, or borrowing entity, experience, equity, liquidity and LTV/LTC. A fund control company is assigned to allocate and distribute the funds according to the approved budget by the bank. The assigned fund control company inspects completed work prior to issuing payment to the owner or builder.
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