Purchasing a lot- It's a great time to buy if you can afford it. (edit/delete)
Things have changed dramatically in the last eight to ten months when it comes to acquiring a lot, especially in Maricopa County. Banks are pulling back nearly daily on loan to value guidelines, increasing reserve requirements and raising credit score minimums. The days of buying a lot sitting on it for a few years and selling for a nice profit is over. Lenders want buyers to invest deeply and someday, within two -three years, build a primary residence.
Minimum down-payment is now 25%, with some banks as step as 40%. This is due to declining values and the number of lot loans going bad. Nearly all banks are requiring five percent more down across the board on loans in Maricopa County. Banks are seeing more and more land coming back to them and are taking steps to insure future loans do not. Why are loans going bad? People overpaid and held on too long. They cannot sell the land without having to pay money to close a loan. Most people do not have money laying around to pay to SELL their property.
Full document loans still exist. Stated income still exist, however, I prefer to call them asset based stated income. If you are going state your income you better state a reasonable income and be ready to back that up with six months of your stated income in reserves, as well as, having your down-payment liquid.
Now the good news. There are many motivated sellers in the market. You can find good deals out there. Do your diligence and work with a Realtor that specializes in the area where you are looking and contact banks that are known for lending on land and inquire about lots they have available. I have seen lot purchases that are 25% less than what you would have paid six months ago.
It is a challenging market but with the right plan and with some resources you can still get a great piece of land.
Brad Brown
Construction Loan Specialists
Scottsdale & Paradise Valley
Home
Loans
Loan Process
Contact Us
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 Ext 307- office
480-393-8801 - fax
bradbrown@communityfirstfinancial.com
http://www.communityfirstfinancial.com/
http://www.scottsdaleconstructionloans.com/
Thursday, March 20, 2008
Required Investment in a construction loan.
Required Investment into a construction loan- "Skin in the game" (edit/delete) Maricopa County, the largest county in Arizona and one of the largest county in the USA, had over 22,000 building permits issued in 2007. This estimate is provided to me by Construction Monitor, LLC. With in this 22,000 there were some quite large home built and many of them still being built. The ultra luxury home that is 10,000+ square feet can take 2 or more years.
Now here is a question that I received today; What is the largest construction loan I can do? My answer is pretty simple: there is no limit. If you want to build a $20 million mansion I can finance it. My question to you is do you have $10 million dollars to put down and can you document income enough to support such a payment. This illustration is a inflated to make a point, it is not the dollar amount that is in question, but how much money do you have to put in the project.
Simple rule in construction loans: the higher the loan amount the more money an individual needs to invest in the project.
I wish I could just write out a simple formula about how much money is needed, but because construction loans are so unique and have variables like lot equity, sweat equity (owner builders), cross collateralization and so on. It is very difficult to group everyone together.
If anyone ever has a client that needs some guidance, email (brad@cffinfo.com) me the answer to these questions and I can tell you what money they need invested into the project. In the construction industry we call this "skin in the game".
Do you own the lot?
If so, when did you buy?
What is the lot balance?
What is the lot value now?
What are the construction costs?
What is your completed appraised value?
What is your estimated credit score?
Can we fully document your income or do you need stated income loan?
With this information I can create a starting point as to loan type and capital required to close your construction loan.
Brad Brown
Construction Loan Specialists
Scottsdale & Paradise Valley
Home
Loans
Loan Process
Contact Us
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 Ext 307- office
480-393-8801 - fax
bradbrown@communityfirstfinancial.com
http://www.communityfirstfinancial.com/
http://www.scottsdaleconstructionloans.com/
Now here is a question that I received today; What is the largest construction loan I can do? My answer is pretty simple: there is no limit. If you want to build a $20 million mansion I can finance it. My question to you is do you have $10 million dollars to put down and can you document income enough to support such a payment. This illustration is a inflated to make a point, it is not the dollar amount that is in question, but how much money do you have to put in the project.
Simple rule in construction loans: the higher the loan amount the more money an individual needs to invest in the project.
I wish I could just write out a simple formula about how much money is needed, but because construction loans are so unique and have variables like lot equity, sweat equity (owner builders), cross collateralization and so on. It is very difficult to group everyone together.
If anyone ever has a client that needs some guidance, email (brad@cffinfo.com) me the answer to these questions and I can tell you what money they need invested into the project. In the construction industry we call this "skin in the game".
Do you own the lot?
If so, when did you buy?
What is the lot balance?
What is the lot value now?
What are the construction costs?
What is your completed appraised value?
What is your estimated credit score?
Can we fully document your income or do you need stated income loan?
With this information I can create a starting point as to loan type and capital required to close your construction loan.
Brad Brown
Construction Loan Specialists
Scottsdale & Paradise Valley
Home
Loans
Loan Process
Contact Us
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 Ext 307- office
480-393-8801 - fax
bradbrown@communityfirstfinancial.com
http://www.communityfirstfinancial.com/
http://www.scottsdaleconstructionloans.com/
Subscribe to:
Posts (Atom)
