One Sentence Summary: This video describes the process of how National land developers have been building communities across America for decades; convince banks there is value through hard data. Good video on how to start a land development company. Now become a general contractor and you are in business.
I’m not seeing many people discussing FHA one time construction to permanent loans which seem to be an amazing deal. Are these hard to find? I’m just surprised I don’t see more people discuss the FHA version of this.
That's what I'm using with my clients. Unlike the loan advertised in this video, FHA can close one time, buy the land, fund the build, and then convert into a 30 or 40 yr fixed.
Amazing. Seems like exactly what we need. In your experience, are there many large lenders that offer this? I’m hoping to use it for new construction homes in the Phoenix, Arizona area.
@@1lildavis very interesting I was curious about this one bulk loan for land, construction then convert into mortgage. Also had no clue there was a 40 year.
Thank you for sharing this information. I was almost gave up and was about to sell my land in very desirable location. Now with this information about zero down payment loan I am going to move forward.
I am confused. Based on what vie found, a construction loan covers the building cost and the you'll need to get another loan for the mortgage? Where a Construction To Permanent Loan is one loan that covers the build cost and then transfers to a traditional mortgage once completed. My question: If you use a construction loan why would you need to get another loan as a mortgage? if you just paid to have the home built and pay that loan off is the home not paid for? why "two loans" why a mortgage? not sure if I'm making sense. Thanks.
Well usually if you have the money to pay off construction loan at the end of the term, then you probably don't need a loan at all. Construction loans are short term loans that come due at the end of construction . Most people don't ha ve the cash to pay that off so they get mortgage.
Well you sort of skate right over the land part Brandom. The bank isnt apt to issue a construction loan on a property that isnt paid for. Reason as you know is that they want a first place position with their loan. If the note on the land isnt recorded, and you have a deed showing you own it, that will certainly work in your favor. But as a rule, its first things first, pay off the land, which represents the required down payment. As you know, there is no such thing as a free lunch.
In this case, my construction loan absorbed my remaining land loan so now it's all under one loan. I didn't put any money down on the construction loan to build the house.
This video was extremely helpful. I was thinking about financing a new construction, watching this was gold. I have a two questions 1) if I had to put a down payment due to insufficient built in equity from the appraised future value. And upon completion the property value goes up for more than the appraised value, would I be able to pull back my down payment ? 2) Does this loan process and the zero down payement work for investment property, like a duplex? Thank you!
I don't have direct experience with either situation, but my suggestion is to simply ask a few lenders these exact questions. If lenders say no to your first question, then you can always do a cash-out refi if you have sufficient equity. You may be able to get creative with the second question if you can claim it is a second home. I think most lenders will require some form of down payment for an investment property. Good luck!
Very informative video Brandon thanks. Do you think lenders are still willing to do $0 down if you own the lot in 2023? I bought a lot and plan to build a duplex on it. 350k cost to build, 525k ARV.
It's definitely more challenging to make the numbers work now with current interest rates and high construction costs, but I'm sure it's still possible in some markets.
@@brandon-built Very interesting, I’m definitely going to talk to more lenders once I have my full estimate and floor plans ready to see if I can do minimal down payment. Builds are cash intensive since you have to pay subs before you get the draw from your bank. This is in the Oklahoma City market.
I've always wanted to try going modular or prefab. Just check with the local building department first because I wasn't able to use any of the modular options in my county. And also make sure that you can convince someone to assemble it unless you are doing it yourself. I couldn't find a contractor willing to assemble a modular home because there's no profit margin in it for them. Good luck!
I'm guessing that there are already structures on the property. I do not have experience with this scenario but it is worth asking lenders if they'll do it.
Are builders usually agreeable to a fixed price contract? Ive known people that have had supply charges raised just days before closing in that they thought was a “fixed price contract.”
Brandon, can you explain the process of using equity created as down payment? I am in Bay Area. Cost to build = $1.5M. New house value after completion = $3.5M. Equity created $2M. Does this mean I will not have to make any down payment? How can I leverage this equity to pay the monthly construction loan installments?
Those numbers sound great to me. If they are accurate then I would be surprised if you have to put any money down. I recommend you call Upmqua or a similar lender to speak with a construction specialist. Tell them about your project and they will explain the process. You don't have to commit to anything, just get as much info from them as you can. Good luck.
Can you get a C2P loan without absorbing the original land loan? Especially if that land loan is at an absurdly low rate compared to what a new loan would be at.
Yea for sure. Makes a lot of sense to keep them separate if your land loan has a lower rate. Of course you should still confirm the C2P loan terms before signing anything since each lender's policies may differ.
The projected final value of the completed property needs to be high enough to cover the loan amount+20%. Whether it's in a rural or urban area. You can include pretty much anything you want in the construction loan as long as you qualify for enough $$$ to cover everything.
Rural area will have less comps for the lender to use when determining your projected value so that might make it more difficult to get the zero down loan
Brandon, this video has been extremely helpful. I am in Bay Area and I believe you are too. Can I contact you directly if I have questions? I am in the process of lot split and build new home. My main concern is I want to spend on this project only if I am sure I will qualify for the construction loan. What is the sequence of steps you would recommend? Do lenders give pre approval for construction loan first, before I start spending on survey, design, etc?
I want to do a new construction loan but every financial institutions I go to they want 20% down and my credit is good. I live in MISSISSIPPI. what can I do to get a construction to permanentl loan. Need all the help I can get.
If you don't have a boatload of cash then I would start by getting pre-qualified from a construction lender to see what your budget is. At the same time you can talk to a bunch of contractors in your area to get an idea of roughly how much it costs to build. If everything seems feasible within your budget then you can move forward.
So I only bought land and paying 200$ a month for it, and I want to do a shed/ garage home conversion for under 70k, im only 24 and I make 29k a year, and it seems like it would be cheaper a month than rent. I have construction friends, Do you think Im being too optimistic? Would a 80k loan plus my 200 be cheaper in the long run? I just want the cheapest option without renting, any advice?
Compare your projected monthly payment to the current market rate rent for a similar size space. Your ability to build what you're talking about depends 100% on what your county's building department allows in terms of alternative housing solutions. Call them up today and see what your local laws allow.
How can you get a proper construction price quote from builders without exact building plans? And if you need the plans before you decide on a builder, who do you go to to draw up these plans and put them on paper? Or, are you giving each builder you "interview" basic plan wishes? I'm just confused a bit and want to be sure I'm doing everything in the proper order to save time. It almost sounds like applying for the actual loan is close to the last step, as the applicant needs to know how much it will cost, provide building plans, etc. So, secure the land, check. Then, talk to builders first to get estimates and general design features? Or lenders first? Ugh..Please help.
The actual loan application is the last step, but you should involve your lender from the very beginning to figure out your budget. Talk to contractors/builders to get a rough idea of the cost to build based on general specs that you provide them like square footage, number of beds and baths, site issues, etc. If needed, adjust your general specs based on the rough prices. Design the house, either with an architect or with a design build company. Engineering is not always needed yet. Get accurate quotes from builders based on your drawings. Take those drawings and a signed building contract and apply for the construction to permanent loan.
@@brandon-built Brandon, thank you so very much for the quick response and excellent information. It really means a lot! We get so clouded with the process and your videos are quickly becoming the necessary ammo we need to get it done. We will succeed. Thanks again my friend, you've got a new sub!
Question, so I bought my land cash and my plan is to build a single family home and also on the back of the lot there is an existing 600 square feet garage that i want to convert to a duplex, my question is do you think the bank will give me a loan to cover all of that in one loan or would they make me get a separate loan to convert the garage into a duplex?
That sounds like an awesome project, but I'm not sure 🤔. If I had to guess...you might be able do the whole thing under one loan if you put 20-30% down. Otherwise you might be able to do zero down on the primary residence and then a separate loan with 30% down on the duplex. My advice is definitely to reach out to a few construction lenders and just ask. I'm really curious to hear what they let you do. Good luck!
when applying for a permloan home do i have to live there? i really wanted it for an investment purpose but do i tell the banks that when applying for a perm loan? i rent now and see good prices 2 hours away but i dont want to live there... what your thoughts thank you..
@@scratchlessputters that makes it harder to pull off because appraisals are notoriously low for tiny homes. Not saying it is impossible but it will be less likely to appraise at a high enough value to make up for the down payment.
Does the home that youre building have to be around the same property value as surrounding home near you? Like if homes near me are 2000sqft and cost 800k but I want to build a home that’s 400k and 1000sqft would that even be possible?
@@Justsayin71 in my experience the math isn't so simple. it doesn't cost half as much to build a home that's half the size. It would be more like $500k to build a 1000 sq ft home in your case. And that makes it harder to appraise. Depends on your unique location though. It might work out
@@brandon-built thanks for the reply! But in terms of even getting approved to build a home that’s 20%-30% cheaper than surrounding homes. Would the city/lender even approve a build like that?
@@Justsayin71 the good thing about most building departments is that they will answer that question for you before you commit to or pay for anything. Just give them a call. Good luck!
I'm clueless here very early starting out and just trying to get info! But how do you find reliable builders? I'm scared that I'll have a horror story!
Reviews reviews and more reviews . Read them . Also go see the work in person if possible . I've looked at homes that were done by the builder I chose .
I make monthly payments like any other mortgage. I was approved for the loan amount based on debt to income and creditworthiness so it's within my means.
Yes. My understanding is that most lenders will require the owner to be a licensed contractor for owner/builder to be financed with one of these construction loans.
US Bank is the only big bank that I know of, but regional banks are your best bet. Try Umpqua if you're on the west coast or any bank that offers construction to permanent loans.
The project is appraised and the loan is signed prior to construction so the bank can't take it away if home values sink during the course of construction. As long as you weren't planning on selling the property immediately after building it then you can wait out any home price declines.
Anyone know of any lenders who offer NO interest only payments throughout construction? (Before you say there aren't any, there is one that I've found, The Mcknight Team in texas)
@@brandon-built OH!!! okay, I remember submitting something to FHA a few months ago, so must've forgotten since we've spoken to so many people since then, Lenders and builders haha. Thank you!
But USDA loans are only available to a small sunset of people which is why they aren't covered here. Construction to permanent loans are available to everyone.
Hi Brandon! I was wondering if you have any advice for couples looking to build their very first home as a tiny home. Are there other things we need to look out for?
Things I've heard about building tiny homes: Permanent foundation vs mobile are treated very differently by lenders so research what financing might be available. If you are relying heavily on financing then it may be difficult for a tiny home to appraise high enough for a sufficient loan to value ratio. Check with your local building department to make sure you are allowed to build the type of tiny home you are thinking of before you buy land or commit to anything. Talk to builders in the area to get a sense of the pitfalls.
Question, when the new build appraises for more than the cost of the build plus land, does that increase your loan amount when you use the “created equity” from the build as your down payment?
I had to think about that one. I think the answer is yes because you are getting approved for a higher loan amount that you otherwise wouldn't be able to qualify for without the created equity.
