TO BUILD OR NOT TO BUILD?
That’s a question I hear a lot. Last week we had a presentation from one of our lenders about construction loans, and I want to share a few key takeaways with you.
When someone wants to build a new home—whether they’re buying a lot, tearing down an existing home, or starting from scratch—there are usually three major components involved.
- First, the land. If you don’t already own it, land loans typically require around 50% down.
- Second, the design phase. You’ll need an architect and an engineer, which means upfront costs.
- Third, permits. These also cost money—and time.
Once those pieces are in place (or sometimes while they’re in progress), the next step is securing a construction loan. This loan has two parts:
- the construction phase, and
- the take-out loan, which pays off the construction loan once the home is complete.
Traditionally, when clients asked me about construction financing, I had to qualify them based on their income for the future take-out loan—and that could be challenging for some borrowers. But here’s the good news.
In this recent presentation, the lender explained that they can now qualify borrowers using alternative income documentation, such as:
- DSCR,
- bank statements,
- or profit and loss statements.
That opens the door for people who may not show enough income on tax returns but are otherwise very strong borrowers.
If this raises questions for you—or if you’re thinking about building and want to explore your options—give me a call: 415-225-7920. I will be happy to help.
Best wishes,
Manny Kagan,
President,
Pacific Bay Financial Corporation
Your professional mortgage broker since 1983
