I often receive calls from frustrated home builders and developers who have had their loan package in underwriting for months with no approval in sight. After the mortgage meltdown, banks are very reluctant to lend on spec construction projects.
Often, construction loan borrowers have an excellent credit profile, good reserves, and a great project. However, the banks are just not pulling the trigger. It’s even worse if you don’t have a finished lot and you need some capital for the lot improvements.
So you ask what is one to do without the availability of capital to get an in-demand project rolling? Well lucky for you there is an abundant amount of private money ready to lend on construction projects throughout California.
The same rules apply to a traditional spec construction loan. However, private money funds understand complicated construction projects. They know how to quickly underwrite a deal and determine if it is good or bad. Most of all, the people making the decision on these private money construction loans are often developers just like you.
Here are a few tips on getting a fast construction loan approval.
- Have a solid construction budget- with all finishes identified
- Make sure you have your executive summary dialed in
- Have good comparable sales showing a realistic exit price
- Have an updated resume from your contractor
- Have the contractors insurance policy handy
- Have all of your financials ready to go
- Have your LLC or corporation docs available
- Have permits, soil report, and plans ready
- Create a dropbox folder that you can share these docs with the loan originator
- Have a copy of your credit report
- Put together a summary of past projects you have completed in the past 3 years
Once you have the package ready, it is time to select a lending company that can deliver a LOI (Letter of Intent) within 48 hours. The more complete the file you submit, the faster you will get an answer back from the underwriter.
Pick a lender you feel comfortable working with that returns calls and one that you can develop a long-lasting relationship with. For a free no-hassle look at what lending programs are available, give me (Beau Eckstein) a call today at 925.852.8261.
Get rid of the frustration of working with the banks and get ready to break ground on your spec construction project.