Construction Financing

Construction financing for residential properties has become very difficult. Most lenders have stopped doing CP (construction to permanent loans) due to the large amount of homes for sale.

The construction financing for these projects has dried up for both clients and builders. Developers are seeking construction loans are finding that banks are generally not willing to provide the line of credit necessary to build the homes.

This eliminates the client expecting the builder to use his own funds to construct the home. The client will have to seek a construction loan in order to build their home. It appears that lenders are very wary of lending unless the borrower puts at least 25%-35% down payment. This would be on loan to cost (LTC) of the total cost to construct plus the land costs. If the client owns the land free and clear, this will significantly increase the chances of getting financing because we can use the land as down payment. I believe the construction financing industry will come back once we get back to a normal amount of homes for sale.