Want to Build a Home: Bring Cash!

Want to build a home? Better bring cash!



We have been working on information for a client concerning a construction loan. If you have not tried to acquire a construction loan in a while you are in for a rude awakening.



For a lot and home totaling approximately $420,000 we found out the following:
•The lot has to be purchased usually for cash.
•There is no longer temp to perm loans
•Therefore two closings occur
•Requires 30% down payment
•Takes 30-45 days to close
•Buyer and bank determine draws
•Monthly interest payments are made on the draws as they compound on a daily average balance (will amount to approximately $12000)
•Need to have 10% in reserves for possible overages
•Once the home is completed the bank will proceed with making a loan on the house. Problems have occurred when the home does not appraise due to price per square footage being higher then resale properties. Some folks have had to put down additional monies down due to low appraisals.
•In order for the builder to be approved by any bank the builder needs to provide: builder's license, proof of liability insurance, and letters of reference.



We had numerous discussions with banks big and small in the Atlanta area. A lot of the institutions were no longer interested in doing construction loans. Their reasons were the same: As long as resale prices remain low, and foreclosures continue to appear, it will be difficult to get a solid appraisal on a new home.

If you are an individual debating whether to build or buy a resale do your research