Construction Loans-with Letter Of Credit

Loans

Are you looking for a “Ground up” Investment Construction Loan in California or in the South Western US, maybe with a Letter of Credit or “LOC” that can fund quickly, with aggressive financing terms?

Do you seek to leverage your liquidity in an entity to “improve your game”??

Are you an Experienced Builder or RE Investor?? Or more of a “Less” experienced Builder or RE Investor who wants to Ramp? Maybe even want to build your new home for the family? We have solutions for both. You came to the right place! Since 2009, Dan Cassel and the Trinity Mortgage Broker team has been committed to helping our New Construction Borrower’s achieve their Real Estate Dreams, as we navigate the often confusing world of Construction Real Estate Loans.

Dan Cassel and Trinity Mortgage help leverage Borrower Real Estate Equity and Investment Loan needs, with good communication, solid technology, expertise, and the “Common Sense” to deliver several specific, quick, reliable, ground up “Spec” Construction loan products for both SFRs and/or Multifamily projects. We have benefited from long term “Real Estate Lender” relationships and use various loan products that save our borrowers both time and money. These factors allow us to deliver a full range of well priced Investor-Builder, and Family Loan products.

Most loans typically ready to begin with up to the lesser of 75% of Loan to value or loan to construction/LTC and go upwards up to 95% of the Construction Budget, depending on the desired cost of money sought. There are all sorts of methods for determining the down but ultimately it seems a good number to build is 25% equity or more. And generally some loan contingency and interest reserves and common of course. They want to know if your project is delayed, that there are adequate Borrower/Entity reserves.

Construction loan product: Solutions!

We generally place loans on “Ready to Build” Multifamily and Residential homes, generally up to 20 units in California and in the South Western US. We place and fund both Bank or Non-Bank Construction Loans and Real Estate Investment Solutions like cash out and Portfolio restructure. We are often able to close these loans in 30 days or less once we have all the documentation/Plans/permits and the LOI.

Many of our loan products are more tailored for active, experienced builders and investors who over the last 3 years have been active in Construction and Fix and Flips. One of our popular loan products is strictly for more experienced “Professionals” actively building or Flipping. It offers qualified Builders or Investors up to a 10 Million Dollar Line of Credit (LOC) and the Loan Rates are also fixed for up to 1 year.

If you are less experienced, the lenders will generally focus on your last 3 year history of RE ownership and sales, liquidity, high lines of credit and so forth. Below is a sample of our LOC loan information and a few other construction loan details.

Our Construction loan sources typically offer our Borrowers Letters of Interest (LOI) within 72 hours of application and prior to final approval of course. We all review the loan terms and any required up-front fees to review plans, applications, and supporting documents. Our Loan knowledge saves our clients money and we look forward to the opportunity.

To reach an Independent Mortgage Expert directly please phone 866-310-1112. To request more detailed information, just simply please complete the “Let’s Talk” form below and note further loan details below that information.

 

 

New Construction Loans 

LOAN
PURPOSE
- Ground-up construction loans for developers and investors building 1-5 properties at a time
– Lot financing can be included, if lots are in build-ready condition
– Program includes exposure line of credit for experienced large volume investors, or single loan option
 INTEREST
RATE 
Varies with Borrower Liquidity, Net Worth, Prior Credit Limits, number of properties built, number of deals completed.
 MINIMUM
PROPERTY VALUE
 N/A
 TERM
 12 months (standard), with optional extensions
 BORROWER TYPE
 LLC, Individual, Limited Partnership, or Corporation
 MAXIMUM
LOAN-TO-VALUE (LTV)
 75% -
 MAXIMUM LOAN-TO-COST
(Loan to construction budget), COST IS PURCHASE PRICE AMOUNT
 95% on this product
 WHEN DO WE USE LTV VS LTC?
 Generally, we use the lesser of LTV or LTC calculation
 CASH FLOW REQUIREMENT
 N/A
 CONSTRUCTION FINANCING
 Funding up to 95% of Construction Budget, up to 75% of Land Value
 PROPERTY TYPE
 Non-Owner Occupied: Single family residences, 2-4 family units, Condos, Town homes, and Multi-family properties up to 20 units

 

Just complete this form and one of our Mortgage Experts will respond promptly! We look forward to our first conversation.

 

Construction Loans, more details:

  • *Generally a construction loan begins just prior to entitlement and can take a couple of weeks to round up the required documents and issue a clean approval. So get that documentation together!
  • *Construction and even Fix and Flip loans are often approved based on many details that may go deep, besides on the properties details you seek to develop.
  • *Some of these details to apply may include your family or entities Liquidity, your Net Worth, Number of projects executed, Credit scores over 650 is common. A Bio or Resume is common showing your years in that business.
  • *Builder and investor construction loan options and pricing for really experienced builders or less experienced builders building their first project can vary greatly.
  • *We are experienced and offer short-term financing for ALL Residential Real Estate Investors from 1-20 units, Apartments or Residential
  • *Our process is simple and yet like many construction loans, they require considerable construction detail form the builder.
  • *Loan funds are advanced in stages, not all at closing like a home purchase
  • *Deed of trust secures future advances, up to stated maximum loan amount
  • *Construction loans are generally short-term or “interim” loans by nature
  • *12-18 months common for apartments, other commercial properties*
  • *Lenders typically use conservative Loan-to-Value ratios
  • *A common loan with Dan is a loan to 75% of Land value then up to 95-100% of construction budget
  • *Construction loans are one type of open-end loan
  • *Loan funds are advanced in stages, not all at closing

Interest charge details:

  • *Construction loans are typically interest only
  • *Interest is charged on the outstanding loan balance each month
  • *Interest rate is often a adjustable rate loan, since loan amount increases over loan term, interest increases each month
  • *Generally “Prime rate plus margin” is commonly used
    *Loan amount may include interest reserve or borrower will make monthly interest payment
  • *If an interest reserve is included, interest is deducted from the reserve as earned
  • Appraisal details:
  • *Information on the type and quality of improvements
  • *Construction loan amounts are typically based upon a loan-to-value ratio that uses the “as completed” property value.
  • *Appraiser will value the property based upon the land value plus the estimated value of improvements, assuming that the improvements are constructed as set forth in the plans and specifications

Construction Loan Risks:

  • *Carrying time
  • *Cost overruns
  • *Labor issues
  • *Construction loans typically present a higher risk than loans made on completed properties
  • *improvements may not be completed
  • *faulty construction
  • *mechanic’s liens

This risk can be minimized by:

  • *Goal is that lender will always have sufficient funds remaining to complete construction
  • *Controlling disbursement of loan funds
  • *Holding back contractor’s profit
  • *Getting lien releases
  • *Title insurance endorsements occur before each disbursement
  • *Getting completion and payment bonds

Key details to consider:

The borrower on a construction loan may be either the future home owner or a builder.

When the home owner is the borrower, usually:

  • the borrower may already own the lot
  • the borrower will have a construction contract with a builder to construct the home
  • loan funds will be used to pay the builder

When the builder is the borrower, usually:

  • the builder already owns the lot or takes out the land portion too.
  • the future home owner is unknown
  • Construction loans made to the home owner borrower may be combined with a long-term loan that begins when construction is completed.
  • This a common feature in Owner Occupied Spec housing.
    • known as a construction-permanent loan
  • During construction loan period, borrower pays interest only
  • When construction loan period ends, loan converts to an amortized loan

Underwriting Notes

  • *Source of repayment of loan is the sale of the property to a future buyer
  • *Builder loans are sometimes called “speculative” loans because the buyer is not identified at the time the loan is made
  • *Lender is not looking at the builder’s income as the source of repayment
  • *Builder’s financial condition and credit are analyzed more to determine if builder can pay for any cost overruns, can carry loan interest until property is sold, and pays vendors on time
  • *Lenders typically also look at the builder’s experience when reviewing the loan
  • *If lender is providing construction loan only, will typically require take-out loan commitment from another lender
  • *Second lender commits to provide loan to borrower when construction is completed
  • *Take-out loan is the source of repayment
  • *Construction lender is less concerned about the homeowner’s qualifying ratios
  • *Lender will also review construction contract and builder’s experience
  • Lender will generally underwrite permanent loan using standard borrower qualifications
    • Income ratios, credit, and reserves
  • Lender will review construction contract, builder’s experience for construction loan risks

Construction loan LTV may be lower than permanent loan LTV

Loan funds are advanced based on completion of improvements

Loan advances can be made according to a predetermined schedule based upon stages of completion or based upon a percentage of completion of line items on the construction cost breakdown

Advances are also called disbursements, draws, or payouts

Rules for construction advances are typically set out in a loan document called a “building loan agreement” or “construction loan agreement”

A. Borrower applies for disbursement:

B. Lender inspects property and determines percent of completion

Lender advances funds to borrower or jointly to borrower and contractor to pay construction costs based on construction progress

Lender holds back some percentage of loan until after construction is complete and no liens filed

Example: a 5-10% hold-back is common

Lenders will use a promissory note and deed of trust for construction loans

Construction loans also use a building loan agreement, which:

  • Determines how and when loan funds will be disbursed

Describes conditions to disbursements:

  • lien releases, title endorsements, inspections, percentage of completion

Dan Cassel Trinity Mortgage NMLS # 347918 CADRE 01146347

We are here to help. To reach a Independent Mortgage Expert directly please phone 866-310-1112. If you seek to just start a new Real Estate Loan Application simply click here.