Get Approved for a New Construction Loan by Following These Steps

Рет қаралды 43,626

Күн бұрын

I'm giving away my detailed step-by-step guide on how to get a new construction loan to build a home. Applying for a construction loan to build a new house has a lot more requirements than a traditional mortgage for an existing home. It all starts with identifying all of the construction lenders that are willing to underwrite new construction loans in the neighborhood where you want to build a property. Once you find a construction lender who is willing to work with you on your construction project, it's time to talk to a construction loan specialist at the bank to learn their specific construction loan application process. Make sure to ask them what types of construction loans they offer like construction-to-permanent or construction-only loans. Also ask them what the loan to build a house can be used towards such as permit applications or the purchase of land. Some construction loans allow you to purchase land with the loan and some do not. However, you may be able to use your construction loan to pay off an existing land loan. The first step in the construction loan application process is to get pre-qualified or pre-approved by the construction lender. The lender will require you to submit architectural plans or working drawings as part of the application. These architectural plans don't need to be engineered before approval. You will need to sign a fixed-price contract with your builder or contractor that includes the budget for every single step of the construction process. A course of construction insurance policy will need to found but you don't need to pay the insurance premium until after the construction loan is approved. After you submit your construction loan application, the construction lender will order an appraisal of the property. Depending on the results of the appraisal you may be able to build your home with zero money down. Once approved you will have one year to build your house although getting an extension is easy by paying a small fee. During the course of construction you are only responsible for paying interest on the amount of funds that have been drawn so far.

Пікірлер: 96

@pedroescoboza5486 Жыл бұрын

The best information I have found in KZfaq about this topic! Simply excellent… thanks

@brandon-built Жыл бұрын

Wow, thank you!

@clarenceflowers5021 Жыл бұрын

You are very good at explaining the process. Thanks for taking the time to do so.

@brandon-built Жыл бұрын

No problem, thanks for watching!

@BrianaBudgets Жыл бұрын

I’m planning on having my land paid off next year so trying to educate myself as much as I can. Thanks for the helpful video!

@brandon-built Жыл бұрын

Awesome! Let me know if you have any questions.

@juane6838 Жыл бұрын

Great video. I'm have a construction loan, going to settlement middle of December. The process to get here was painful. I will add, before you do anything, meet with the perspective lender and the builder. Some builders assume since you are going the build route, you are already familiar with the process and the 2-way communication suffers.

@brandon-built Жыл бұрын

Thanks 🙏

@RosseSanz Жыл бұрын

Hello. Thank you for all the great info. I’m wondering if you are able to put as a down payment the expected equity the house will acquired when selling ?

@kysdcd Жыл бұрын

This was so helpful, thank you!!

@brandon-built Жыл бұрын

I'm glad you're finding my videos helpful!

@Designbuild828 9 ай бұрын

Thank you. This is a very detailed list.

@brandon-built 9 ай бұрын

You're welcome!

@MD-kq7wz Жыл бұрын

man this process is so complicated. thanks for breaking everything down.

@brandon-built Жыл бұрын

Yup, most people don't realize how many more requirements there are to get a construction loan.

@fb510m 7 ай бұрын

Nice job on the video. They made it quite the convoluted process! Dont think I want all that headache🙂

@brandon-built 7 ай бұрын

It's definitely a headache, but it was totally worth it for us!

@lyudmilakhrupin 11 күн бұрын

Helpful information Thanks

@mikemcmanus2815 7 ай бұрын

Fantastic info- thanks!

@brandon-built 7 ай бұрын

You're very welcome!

@cynthiagriffin5291 Жыл бұрын

Great video thank you this will be a big help

@brandon-built Жыл бұрын

You're welcome. Good luck on your project!

@ericadams2045 Жыл бұрын

SO HELPFUL

@brandon-built Жыл бұрын

Thanks, I appreciate it!

@Jonathan_Price 9 ай бұрын

What kind of loan would you need for an amish prefab cabin? Could it be considered construction loan if it still needs a foundation and septic tank etc?

@miriammaria5878 Ай бұрын

Very informative

@brandon-built Ай бұрын

Thanks 😁

@Kaymeron Жыл бұрын

Great video. In addition to money down, do banks generally require you to have a certain amount of cash in reserve?

@brandon-built Жыл бұрын

Mine included the reserves into the maximum loan amount. So if the house costs 500k to build, the bank will require you to be approved for a maximum loan amount of 550k so that there are 50k in reserves.

@BrettMcNary Жыл бұрын

GREAT video! Thank you

@brandon-built Жыл бұрын

You're welcome! Let me know if you have any other questions about the process.

@BrettMcNary Жыл бұрын

@@brandon-built Well, while I have your attention...haha. One question. When you mention debt to income ratio for amount of the loan (i think you said 36%) for sake of understanding let's use 50% as it's an easy number to work with. Does that mean if I take in 10k per month, than only 5k can be used for debt? Also is that usually using the calculation of $700 per month per 100k? Meaning if I had no other debt $700 x 7 (700k) = $4900 Meaning it would take this income to be approved for a 700k loan? Also, if I have 400k equity in the land I'm building on, does that change things? Hell of a question, I know but worth a shot thanks

@brandon-built Жыл бұрын

@@BrettMcNary it's all about your monthly income and your monthly debt payments. So if you make $10k a month before taxes and you have no other monthly debt payments, a bank will approve you for a mortgage with a monthly payment up to $3,600 (36%). Depending on the interest rate of the mortgage loan, this $3,600 monthly payment could be for a 30 year mortgage on a $800,000 house or a 15 year mortgage on a $550,000 house. Hope that somewhat answers your question. Zillow has a great home affordability calculator and I have another video dedicated to the debt to income ratio.

@BrettMcNary Жыл бұрын

@@brandon-built Thank you very much for taking the time to explain that. Your video here is so good that I don't need to look elsewhere for more info. Kudos for that!

@brandon-built Жыл бұрын

@@BrettMcNary Thanks for the kind words 🙏

@RicardoSanchez-jg5un Жыл бұрын

Hey Brandon, can you make a video on doing a deal with a construction to permanent loan? I’ve got a duplex vacant lot and I want to build a duplex and rent it.

@brandon-built Жыл бұрын

I'm hoping to build an investment property myself in the next 1-2 years with a construction to permanent loan. The first property I built counted as a second home so the terms were a little more favorable than for an investment property. There are fewer lenders who do construction to permanent loans for investment properties but there are some out there and I plan to find them eventually.

@thundertagtur Жыл бұрын

Good content 👍

@brandon-built Жыл бұрын

Thanks 🙏

@NicolleMWhalen 10 ай бұрын

I FOUND YOUR VIDEO RIGH ON TIME!

@brandon-built 10 ай бұрын

Happy to help!

@cesarandamandacabrera3918 Жыл бұрын

Great video! I just purchased a vacant lot and Im researching ways to finance my new construction, this is super helpful. Would you mind sharing the bank(s) you use to financed your new construction with zero down? I’m looking to build in Los Angeles county.

@brandon-built Жыл бұрын

Congrats 👏. Try US Bank and Umpqua.

@cesarandamandacabrera3918 Жыл бұрын

@@brandon-built Will do, thank you!

@brandon-built Жыл бұрын

@@cesarandamandacabrera3918 you're welcome and good luck on your project!

@tonyvillagomez1969 Жыл бұрын

I live in San Diego. Is there any bank you recommend?

@brandon-built Жыл бұрын

Try US Bank or Umpqua

@walkerb1734 Жыл бұрын

Would you recommend self funding the project? I have cash to fully cover my build project. But to me it feels like there may be a bit of safety in having a construction loan in place during the project. Not sure why i feel that way? Any thoughts?

@brandon-built Жыл бұрын

You'll avoid a lot of interest-only payments during the course of construction if you fund with cash. I would have loved to do it that way if I had the money. You can always get a mortgage later if you really want to pull the cash out after it's built.

@dantracy7314 3 ай бұрын

I took drafting in high school and self drafted my current raised bungalow and two storey garage. I now want to sell the property and buy some land and build a new house. Will a bank accept my drafting on graph paper or will I have to pay for professionally done house plans?

@brandon-built 3 ай бұрын

That's a good question. Doesn't hurt to just ask a couple lenders if they would accept your drafted plans.

@tentoe10 Жыл бұрын

Nice

@brandon-built Жыл бұрын

Thanks

@rahulroy973 Жыл бұрын

Which banks do you recommend for construction loans in Bay Area?

@brandon-built Жыл бұрын

Umpqua

@javiercuevassanchez6446 Жыл бұрын

what about the house has land already can I used construction loan or is that ADU

@brandon-built Жыл бұрын

You can still use a construction loan for an ADU. You can also use a Home equity loan or a HELOC for an ADU.

@96Views Жыл бұрын

How long do you have to pay back the loans and what are the interest rate

@brandon-built Жыл бұрын

Mine is a 30 year mortgage with 10 years fixed at 3% and then 20 years adjustable rate. That is pretty standard. Most people will refinance to a 15 or 30 year fixed at some point before the adjustable rate kicks in.

@terencejohnson2808 3 ай бұрын

Hello Brandon, did you ever cover using Private or Hardmoney lenders resource for New construction?

@brandon-built 3 ай бұрын

I haven't covered them because they come with increased risk versus traditional bank loans. Also, I don't have experience using private lenders so I wouldn't feel as confident covering them.

@bigj7807 Ай бұрын

Hi Brandon , do you have a email I can reach you direct? I had a couple specific questions regarding order of operations specific to my situation given the equity I have plus my gross income .

@brandon-built Ай бұрын

@@bigj7807 brandomaninfo@gmail.com

@MDog_FPV Жыл бұрын

I understand it depends on many factors, but in general... Can you utilize current home equity as the ~20% down for the construction loan. Example, current home is worth ~1,200,000 and only has 400,000 left on the loan. New build and property is estimating around 2,000,000. For this example, could I use 400,000 from my current home equity to meet the 20% down?

@brandon-built Жыл бұрын

The nice thing is that you can just ask construction lenders directly whether or not they would accept your current home equity as collateral. I would just make a couple phone calls or send emails to a few lenders to get your answer. The risk would be that if for some reason you default on the construction loan then the bank could take your current home.

@rahulroy973 Жыл бұрын

How to get past the debt to income ratio requirement? I already have a mortgage on my current residence and I will not qualify for a new loan. Can we show enough funds in bank accounts?

@brandon-built Жыл бұрын

There are a handful of ways I can think of but there aren't any tricks. Pay off existing debt like a car loan. Refinance current debt if doing so results in a lower monthly payment. Increase your income 😀. If you plan on renting a portion of your new or current property then you can try and see if you can use that projected rental income to help qualify (not likely).

@harnoorsingh7529 6 ай бұрын

Which bank did you use for the construction loan? I am also thinking about building in near Lake Tahoe. Would really appreciate if you could tell me the Bank name.

@brandon-built 6 ай бұрын

Umpqua

@ATMG333 Жыл бұрын

Can one sell their construction project before closing. Can it be done with one closing or 2 closing loan?

@brandon-built Жыл бұрын

Yes you can, but I'm not sure about all the logistics of how it works

@josephtardiff3151 Ай бұрын

What bank did you use? I am in California

@brandon-built Ай бұрын

Umpqua

@christianrodriguez1415 Жыл бұрын

I have a question, I own a 2.5 acre lot and I was interested in using a construction loan to build on it but I got to thinking about the ability to buy land with the loan to. So say I was able to convince my neighbor to sell me his 2.5 acre lot, can I theoretically use the loan to buy that land add to mine to make 5 acres than build on it all in one construction loan?

@brandon-built Жыл бұрын

You would most likely have to use a separate loan to buy any land and then use the construction loan to absorb that loan on the land. Most construction lenders won't let you use the construction loan to buy the land directly, but they do let you use the construction loan to absorb another loan.

@jackclark9372 Жыл бұрын

I'm struggling to find a local lender willing to do a construction loan on an INVESTMENT property.. they all are only willing to do it for a primary. I own a 2.6 acre lot in a killer location. I'd love to put a house on it as a short or mid-term rental. Any advice on where to look for this type of construction loan?

@brandon-built Жыл бұрын

Can you get a construction loan for a second home/vacation home if you spend a minimum number of days there per year?

@diangelo0714 Жыл бұрын

Ton of creative ideas. Sell a piece of the property to fund...partner with someone who has the money but no land.

@voyagetravel1840 Жыл бұрын

Is it possible to get a construction loan for a house I would be living in with my business credit score instead of my personal?

@brandon-built Жыл бұрын

You'll have to ask a few lenders to see what they say. I'm not sure.

@ramhernandezvip Жыл бұрын

What about if I want to sell the house later on?

@brandon-built Жыл бұрын

You can sell the property at any point, even during construction, as long as you can find a buyer. There will be a lot of buyers interested in a newly completed house if it's in a desirable location.

@milesdyson5211 22 күн бұрын

So if the cost to build is 300k and it will appraise for 450-500 do I just pay the cost of the build or market value from the appraisal?

@brandon-built 22 күн бұрын

@@milesdyson5211 assuming your lender allows it...your loan would be for 300k and you wouldn't have to put any money as a down payment

@livinglifesoftly 6 ай бұрын

Hello can you give me any banks in Charleston South Carolina I had a house fire and I have no idea where to go older home

@brandon-built 6 ай бұрын

I have no experience with any of these banks, but in Charleston, South Carolina, there are several banks offering construction loans or home renovation loans: South State Bank: South State Bank offers construction loans for both building and renovating homes. They provide financing options to suit different project needs. United Community Bank: This bank provides home construction and renovation loans, with various options to suit different financial needs. First Citizens Bank: They offer new home construction loans with financing options up to $3 million, including fixed and ARM options. They also provide special financing options for medical personnel. Additionally, First Citizens Bank offers home renovation loans with flexible finance options, including both fixed-rate and variable-rate loans. Each of these banks has different options and services tailored to specific needs, whether it's building a new home from scratch or renovating an existing one. For more detailed information on their offerings, including specific loan terms and application requirements, it's best to contact these banks directly or visit their websites

@ladydriver2146 9 ай бұрын

Yeh yo I just scared the he'll out of me about getting a construction loann, forget that !!!!

@brandon-built 8 ай бұрын

It comes with risk for sure. And you end up lighting money on fire with interest-only payments to the lender during the course of construction. That said, it was still worth it in my case.

@junkmail1262 Жыл бұрын

If you have land already a lot of lenders can leverage the value of the land in your down payment. My lender requires 5% down payment on an interest only construction loan. Also if you are going to pay cash at end of construction make sure there are no pre-payment fees.

@brandon-built Жыл бұрын

Yup, having land already helps tremendously when applying for these loans.

@chrisr.9258 11 ай бұрын

If I already own the land, and the build cost is lets say 300k total, how are the monthly pmts figured/ structured?

@junkmail1262 11 ай бұрын

@@chrisr.9258 your interest payments will be based on payment withdrawals to contractors. The bank will make 5 withdrawals during construction in my case. In your case that is $60,000 in payments to subs per withdrawal. So no monthly payments by you the first month or two. Each time the bank pays subcontractors your monthly payments to the bank will grow.

@ocean1233 9 ай бұрын

CREDIT UNION FIRST OFF

@brandon-built 9 ай бұрын

I love my credit union, but they didn't offer construction loans. If a local credit union offers a construction loan, then starting there is a good idea.