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 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 7% range. The other is for commercial or short term loans. Rates begin in the 8.5% to the 10.5% range. Private loans are asset based more than credit/income and range between 12 - 13.99%. A conventional construction loan will typically not exceed 65% of the cost of the land and construction and or 65% of the final end value.
Traditional 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. 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 expended. We fully review what is sent and work with what you present at no cost to you. Typically we like to see an application by all titled partners a tri bureau credit report, property information, and construction information ie: type of construction, size, cost per square foot, builder informtion. We submit it to an underwriter if it appears to qualify. After preliminary review we will based on those factors obtain a term sheet. If acceptable we will proceed to processing.
Later, the cost of ordering reports, analyzing and processing a construction loan (primarily the property value, permits, construction budget, title reports, legal drawing of documents to close/fund etc) will be expedited. The costs of the reports and processing are the expense of the applicant.
Standard fees will include the cost of a site inspection, possbile appraisal, and nominal processing fee to offset the cost of ordering title reports and other expenses in conjunction with your loan. We typically provide you an approval that will specify costs after we have initially reviewed your file, and have received a term sheet from an underwriter. Underwriters represent either one of our private investment 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. Typically the expenses and a minor processing fee are all that will be expended during the application process. Only bonafide lenders with a proven funding track record, will partner with Spec Money in funding a transaction. In NY our partner /associates often fund directly. And if a private loan is offered, a sight visit might be done for no cost up front, at all, and perhaps only an acceptance fee to the attorney to draw docs (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. There are expenses incurred in both the construction process as well as financing such as property appraisal, title insurance abstract, loan processing. If the appraisal and financials are qualified, then 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.
The application has 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 construction cost ratio. etc.. or cash into the deal etc. However the underwriter will still look to see the applicant is capable of repaying and highly unlikely to default.
If credit is not established, it might pay to consider working 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 the terms of your agreement including a specified origination fee, to be paid at closing. We do not suggest what a broker origination fee should be, however construction loans usually have 2-3 points typically so we suggest 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.
Terms agreed to ahead of time may be disclosed on the initial term sheet, and collected at closing on behalf of the agent/broker.
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