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Construction loan process for new home build questions
Posted on 10/12/21 at 8:16 pm
Posted on 10/12/21 at 8:16 pm
So how does the construction loan work? Do I have to give the bank 20% of total loan upfront?
Talked to bank today but I was told not to pay for things upfront. Sounds like they want me to use the funds they are allowing me. Do I have to spend their 80% first? Then I get my 20% after? Someone please break it down like I’m 10. First time builder. I own the land and just sold my home that I also owned. Bank isn’t owed anything from me.
Talked to bank today but I was told not to pay for things upfront. Sounds like they want me to use the funds they are allowing me. Do I have to spend their 80% first? Then I get my 20% after? Someone please break it down like I’m 10. First time builder. I own the land and just sold my home that I also owned. Bank isn’t owed anything from me.
8
Posted on 10/12/21 at 8:17 pm to shoelessjoe
Some are 10%, I believe most are 20%. I just remember having to come up with the 10% at closing.
This post was edited on 10/12/21 at 8:21 pm
Posted on 10/12/21 at 8:23 pm to shoelessjoe
Why do you think you can get better answers here than just calling a few local banks and lenders? Do you not have any friends who have built homes? Maybe they could direct you to someone.
This post was edited on 10/12/21 at 8:24 pm
Posted on 10/12/21 at 8:25 pm to shoelessjoe
3.50%
Posted on 10/12/21 at 8:28 pm to shoelessjoe
Most banks will loan you 95 percent of the appraised value. If you are building a house and it costs 300k to build and it gets appraised at 350k the bank will back 95 percent of the appraised value. At this rate you could roll closing in to the loan and bring nothing to the final closing and build a house for 0 dollars. I didn’t get so lucky because of material costs and had to bring 19k to the construction loan closing and 10k to the mortgage closing.
Posted on 10/12/21 at 8:33 pm to shoelessjoe
Your house plans will be appraised. If your property is more than 20% of your anticipated construction costs you will not have a down payment. You will get a check book to write checks to sub contractors. The draw schedule is based on percentages pre determined. You only pay interest on the amount of money you have requested in draws.
Most banks won’t allow self builds anymore unless you can prove you have construction knowledge.
Most banks won’t allow self builds anymore unless you can prove you have construction knowledge.
Posted on 10/12/21 at 9:33 pm to shoelessjoe
Do whatever you want. Once the loan is approved, it’s your money.
Posted on 10/12/21 at 9:58 pm to shoelessjoe
I wish I could sticky this thread. So I could better understand this for my next step.
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