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Spec construction Loans aren’t just for new construction.
If you’re building a new spec house on an empty lot, you’ll need a spec construction loan. However, in California, even major renovations may require a construction loan which funds the loan through a draw schedule.
Construction Loan terms and requirements vary from Lender to Lender.
Different lenders have different rules for spec construction loans. You may want to compare loans from multiple lenders to get the best deal. On one hand, this means more work for you. On the other hand, you can be sure you end up with the best deal possible. Working with us you get the best of all worlds a direct lender that has the capabilities of working with other funds, insurance companies and major banks.
The loan period for a construction loan varies from city to city.
Different California cities have different timespans for construction loans depending on the permit process. Spec construction loans are short-term loans. The length of the loan is based on how long the project should take. In the San Francisco Bay Area, construction loans generally last from 6 to 12 months.
You’ll need to do research before you apply for a spec construction loan.
Your lender wants to know that you’ve done your research and understand the construction project. To apply for the loan, you’ll need a detailed estimate of construction costs. You’ll also need to know how long the project will take. You’ll need to prove that you’ll be able to repay the loan, either by selling the property or by taking out a mortgage, at the end of the term.
Construction loans require collateral, usually in the form of real estate.
In California, most lenders require collateral for a construction loan. In general, you’re expected to use local real estate as your collateral. However some lenders are willing to consider other assets as well. Check with your lender to see if your other assets might improve the terms of your loan. If you have available credit, your lender may take that into account during the lending process.
You don’t have to go it alone.
Most builders don’t have the necessary experience to create the budgets and estimates necessary for a construction loan. Fortunately, the San Francisco Bay area is home to many reliable, experienced contractors, investors and lenders. Your home construction team can help you put together a strong proposal so that you can get the right financing for your project. Good contractors also include extra time and funding in the budget to cover unforeseen obstacles in construction.
Construction loans don’t pay out all at once, and that’s a good thing.
Most lenders structure spec construction loans to pay out over the course of the job. An initial payment will cover materials and contractors. As you reach certain benchmarks, the lender will release the rest of the funds to you. This gradual process helps protect both you and the lender during the construction process. The final payment occurs once you’ve completed the work and received the Certificate of Occupancy. Your contractor won’t receive his final payment unless his work is up to code.
In Northern California, the construction loan process is fairly simple. If you’re ready to start building a new home, or plan to extensively renovate and existing property, contact SFR Ventures, Inc. for more information on our custom construction loan program. Please visit http://reiloanpro.com for my information or call Beau Eckstein direct at 925.852.8261.