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.

Lending CriteriaDescription
Purpose:
  • New Construction
Property Type:
  • Single Family Residence (1-4)
  • Multifamily
  • Commercial
Loan-to-Value / Loan-to-Coast:
  • 65% – 70%
Minimum Credit Scores:
  • 680
Prepayment Penalty:
  • None
Minimum Loan Amount:
  • $300,000 – $2,000,000+
Minimum Debt Service:
  • 1.25% – Commercial
Recourse:
  • Yes
Conventional Lender Fee:
  • $1,000 + $1,950 Processing
Broker Fee:
  • 1 – 2 points + $1,495 Processing
Terms:
  • 12 – 18 Months
Reserves:
  • 10% of loan amount
Closing Timeframes:
  • 60 – 90 days
Net Worth:
  • Equal to Loan Amount
Amortization:
  • Interest Only as Disbursed
Collateral:
  • 1st Trust Deeds
Other Costs:
  • All 3rd Party Fees; Fund Control, Environmental, Title, Escrow, Etc.