Q. What states does SpecMoney work in?
A. Our programs are for all 50 states
Q. How much of a down payment is needed when buying land and constructing new property?
A. There are a few different programs. Choosing the right construction loan program for you or your company will be based on key factors. The price of the land, the cost of construction. Also the end selling price will be factors affecting the loan to cost ratio of your project. The end selling price will affect your construction loan to value ratio.
We use a few different ratio's to determine eligibility. We offer tradtional financing programs which means you usually need to have at least 35% into the deal so to speak between equity, and or cash. So if land is $100,000 and construction costs are $100,000 - We might not offer more than $140,000 toward the project.
There are US insured FHA 203 k programs designed for residential builders that require far less of a down payment, but that is not a program we offer.
SpeMoney uses two primary construction loan programs currently. One in which the interest rate is very low, only today starting in the 4% range. The other is for commercial and that begins in the 8.5% range and if risk is higher could go to the 10% range.
Either of the two progams we offer are popular as you only pay interest on the portion advanced. Exceptions are in cases where a private money invesment loan may be sought when a loan does not qualify for our regular programs. Those rates are usually 12% -14% and the loan to values are less than the standard programs - The maximum private money loan for a construction property might be 50-65%. This might work for someone who owns land outright and only needs construction money... but cannot qualify with income/ credit verification standards.
Q. Do you charge up front fees for construction loans?
A. When we initially consult with a client, no up front fees are requested. We fully review what is sent and work with what you present at no cost to you. We submit it to an underwriter if it appears to qualify.
Later, the cost of analyzing and processing a cosntruction loan (primarily the property value, permits, construction budget, title reports, legal drawing of documents to close/fund etc) is quite extensive time wise and for the professionals hired. So it is not free, because we incur those costs.
Standard fees will include the cost of a site inspection, possbile appraisal, and possible processing fee to offset the cost of ordering title reports and other expenses in conjunction with your loan. We only provide you an approvale that may request payment for those costs after we have initially reviewed your file, and have received a term sheet from an underwriter who represents either one of our private invesment partners, or an institutional licensed loan buyer licensed to do business and currently actively funding in your state.
We apply a very strict rule to determining if and when our clients are offered a term sheet and asked for a fee for due diligence, which is the above described analysis. Only bonafide lenders with a proven funding track record, with verifiable references from other licensed and insured professionals. At no time will we provide or ask for you to reviw a term sheet (preapproval) from an unknown entity. We work only with bonafide lenders that are reputable. In NY our partner/associates often fund directly. And if private, a sight visit might be done for no cost up front, at all, and perhaps only an acceptance fee to the attorney to draw doc (set up a closing). That fee often exists to not waste a lawyers time and prevent no shows! It has happened so our policy is to let the investor decide what to offer and our clients to decide if it is what they deem fair.
Private loans have been made with our assistance by individual investors who are simply retired and looking to earn a good return for putting up risk capital. They are always reputable people and work only with attorneys and financial consultants etc. We work hard to bring the best offerings to those seeking construction loans for a speck house or commercial construction project in and around NY, NJ, Long Island, and also throughout the US for instititional fundings.
Q. Could I lose money even after getting an approval?
A. If the appraisal and financials are qualified, then no the loan will usually fund provided permits are in place etc.
However if there is any serious material difference in a) value of the property b) your credit and income c) legal matters affecting you or the property, then it may result in a denial and withdrawal of the terms. Therefore it pays to be forthright and upfront with your representative and disclose pertinant facts. It is the time of our professionals and your money on the line.. so it pays to be honest. Always disclose additional loans that may encumber a property, and credit snaffus that might cause delays down the road. Also in some cases financials do show losses, but it pays to send financials in early on to alleviate dissapointment.
We have to be able to show you can afford to complete the project and repay the loan.
Q) Do you have no income check construction loans?
A) Yes but for a stronger loan to value.. ie: 50% down, or owning the land sufficiently to represent at least 50% equity in the land plus cosntruction cost ratio. etc.. or cash into the deal etc. However the underwriter will still look to see the applicant is capable or repaying and not likely to default.
If credit is not established, it might pay to work with a partner with strong credit.
Q) Do you accept loan applications from mortgage bankers or loan consultants?
A) Yes. SpecMoney receives referals directly and from other traditional lenders frequently. We are happy to list you on the approval as a broker, provided your client has signed an agreement agreeing to your fees to be paid at closing. We do not suggest what a broker fee should be, however construction loans usually have 2-3 points in them typically so we caution sugest you keep that in mind. Typical origination fees range from 1-2 points with most brokers, depending on the amount of work they have provided on a transaction.
The fees can be agreed to ahead of time and if so collected at closing.