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re: Can someone help me understand how construction loans work?
Posted on 4/4/24 at 7:42 am to Random MsState Fan
Posted on 4/4/24 at 7:42 am to Random MsState Fan
What would his payments to the bank look like?
Using the above figures, will he be paying interest from day 1 of the loan on $153K (even though he hasn’t received that amount yet)?
Using the above figures, will he be paying interest from day 1 of the loan on $153K (even though he hasn’t received that amount yet)?
2
Posted on 4/4/24 at 7:51 am to good_2_geaux
I am a commercial lender who does residential construction for builders and developers.
Depending on the financial strength of the borrower we will do 90% loan to cost or 80% loan to value whichever is less.
Typical pricing is Wall Street journal plus 1.00% and 1% origination fee.
Total cost includes closing costs and bank fees. We can finance those into the loan at closing to help with upfront costs.
Interest is due on amount drawn and will obviously increase as more is drawn.
There are 5 draws typically. The slab draw needs a slab survey, permit and insurance we give 20% at that time. Then inspector is sent at the next phases.
Depending on the financial strength of the borrower we will do 90% loan to cost or 80% loan to value whichever is less.
Typical pricing is Wall Street journal plus 1.00% and 1% origination fee.
Total cost includes closing costs and bank fees. We can finance those into the loan at closing to help with upfront costs.
Interest is due on amount drawn and will obviously increase as more is drawn.
There are 5 draws typically. The slab draw needs a slab survey, permit and insurance we give 20% at that time. Then inspector is sent at the next phases.
Posted on 4/4/24 at 8:06 am to good_2_geaux
My cousin is building through the same bank currently and they worked it out to pay the interest due when construction is done rather than monthly. Supposedly the amount is the same
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