If you have found a lot, and you wish to use a “single close” construction loan to acquire that lot, you need to have a long enough “close of escrow” written into the purchase contract on the lot so that you can obtain plans and select a builder in that time period. A construction loan can only close with architectural plans, a signed contract, and a cost breakdown with a builder based on those plans. From a practical standpoint, if you enter into a contract to purchase a lot, and you haven’t yet begun the process of developing plans with an architect, you’re probably going to have to obtain a lot loan or pay cash for that lot.
How much you can borrower is based on two sets of criteria. There will be an amount for which you can qualify using full income and asset documentation and a maximum 43% debt ratio. The maximum loan amount will also be limited to 80% loan-to-value (to $1,000,000 loan amount) of the lesser of two numbers representing the value of the home to be built. One of those values is based on what the property would be worth in today’s market, if finished already as planned. The other number is a cost number based on the current value of the property plus new construction costs.
Elva A. Wormley
33+ Years Experience!
Office (408) 615-8500
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128
NMLS #331981 / CA BRE #01274093... more
I may be able to help you - by referring you to someone. However, I do believe most hard money lenders require a more significant deposit (around 50%) but, if you email me, I am happy to pass your information on....... more