Posted by Ed Garcia on April 16, 2000 at 01:16:22:
(1) LAND. Either free and clear, or 50% paid down for a land draw.
(Note) If you wanted, you could buy a lot with no money down,
have the seller subordinate their loan to construction loan.
(2) PLANS. These plans have to be approved buy the city your building
(3) PERMITS. As you know sometimes the City can require you to build
either conforming structures or off sites, that the City wants.
(4) COST. The Bank will require a cost break down of all of your expenses.
They will want to see a cash flow chart to pay you a voucher system.
(Note) Interesting enough, the bank will take your cost break down and
analyze it with their computers. If the cost are more. That will concern
them, and they will cut it back. If the cost is less, that will also concern
them because they will think you short changed yourself in building
So in essence the bank can be instrumental in verifying your cost.
However, don’t ever count on anyone but yourself. Do your own ,
(Note) the Bank will require at least 10% liquidity on you the borrower.
(5) CONTRACTOR. If you are a Contractor, the bank will want to see
your resume, and your Contractors license.
If you are not a Contractor, then the bank will want to have a resume on
Your Contractor as well as a copy of his license, and financial statement.
If everything is done right , you should be in the deal about 70% to 75%
LTV on a new proper. In fact I have seen better depending on area, and
Size of the deal.
These are just some of the steps necessary to do a construction loan.
Sandra, I hope this will be of some help to you.