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Hi Leighanne. Sounds like a fun project. The cash you will need for the project includes any of the building costs that are not covered by the loan amount. So, paid cash for land and need 400 to build including loan costs, permits, etc. if your loan amount is 300k, you will need to deposit 100k with the lender at closing - right at the the beginning of the building process. After that, you will need to make interest only payments on the outstanding balance of the loan every month plus real estate taxes and insurance as they come due. Hard for me to say how that fits in overall with your sales plan. Go to mortgagematchup.com and find a good broker with construction lending experience and they will walk you through it. I am licensed in WA and ID. Blessings.

@@MortgageMasteryTheater giant thanks for information. We’re building outside of Denver in the foothills. We are able to do this as ‘regular people’ because of years of smart decisions, a little more than 50% cash at the end. I am a jumble of nerves cause we are just getting started. I may need more than luck… lots of meditation … wooosaaa

Off course, but Just because there are opportunities in the market doesn’t mean you should go in blindly. To understand the potential factors that contribute to your financial growth, I'll advise you to seek the help of a professional.

A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.

This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation

“Angela Lynn Shilling’’ is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.

I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.

Inherited property typically is credited with the donor’s holding period so as long as your ownership plus the donor’s is a year or more, then yes.

@@MortgageMasteryTheater thanks! Follow up question. Me and my wife want to build a house on her father’s land. He wants to put our name on the deed along with his. He inherited the land decades ago. Do me and my wife’s name have to be on the deed for more than a year?

@@ryane3970 That's probably a question you should ask your lender as it requires an extrapolation of the basic guidelines. Let me know if you need a referral to a lender in your area and I will see what I can do.

True.

Hi. That is odd based upon my experience. Won't be double interest as it will pay down the principal balance during construction and not go to interest.

@@MortgageMasteryTheater On a VA construction loan the payments during the construction period are wrapped into the loan for a true 0 down, 0 out of pocket loan. They're taking what I would be paying and adding it to the total.

@@chadd587 I guess I'd have to see the disclosures to understand what they are doing.

Thank you. If the date of the purchase (with the original broker) falls within the terms of the agreement (purchase date and geographic boundaries), then you would be contractually obligated to pay the broker according to the terms of the agreement. How that is paid / enforced is going to vary from case to case. Some realtors may even agree to release you but you should never assume this.

@@MortgageMasteryTheater Purchase date meaning the original P&S offer date, not the closing date?

@@therealtashiro Article 2 of the form appears to indicate that it would cover any contract that was entered into before expiration regardless of the closing date.

Hi Samuel. You would need to inquire of individual banks. Spec lending is very similar structurally (project, contractor and borrower approval process) but the lending terms will be significantly different - especially with regards to down payment requirements. Best just to get the directory of local lenders and call them all.

Thank you!

Some lenders are queasy about lending when construction has already started due to heightened risk of undetected mechanics and other liens. That said, some will still do it so you just need to ask.You'll have a better chance if you have good records of what was done by whom and proof of payment. Happy to refer a lender if you let me know where you are building. Best to you.

I spoke with one of more experienced construction lenders and they will do this. Let me know where you are building and I will try to find a good broker with access to this lender.

I understand the confusion. A temp buydown is just a pile of money set aside in the lender's escrow account to offset a part of your monthly payment over a specified period of time. Seen this way, they are not a lot different than escrows for taxes or insurance - money deposited into an account to pay future obligations. If the seller is willing to give us money to do this, we don't look a gift horse in the mouth. Borrower- paid buydowns are allowed by some lenders (and not prohibited by regulations), but uncommon for two reasons; First and foremost, because lender fees are limited by regulations and borrower-paid buydowns are deemed to be fees that use up what could otherwise be charged by the lender. Secondly, if i want to use my own money to pretend I have a lower mortgage payment for a period of time, I don't need to involve the lender. I can just set up a separate savings account and use a portion of it every month. There is a third way that has the lender (not the seller) "pay" for this but the lender will increase your interest rate and/or fees to compensate themselves for funding your buydown. (So, the borrower is really paying for it.) You might be tempted to do this if you think interest rates will come down in the future but note that unlike seller and borrower- paid buydowns, lender paid buydowns are not refundable if you pay the loan off before the buydown period is over.

@@MortgageMasteryTheater Thank you so much for explaining that so well! I think the confusion lies when some lenders say, "it can only be paid by the seller" leading one to believe that it is against regulation for the buyer to pay. I do agree with everything you said:) Thank you so much for clearing that up and for your honesty!

Nice. You should not have to put anything down. If you wanted to borrow the full 500k, your loan to "cost" would be 500/1mm or 50%. Unless it appraised lower than 1mm, then your loan to value would be 500/appraised value. Either way, should not need to put money down. Feel free to reach out if you need a recommendation for a good mortgage broker.

@@MortgageMasteryTheater Thank you so much!

Thanks Missy!

Hi. Thanks so much for reaching out. Not entirely clear on your question. If you are asking if you can use the equity in Texas to secure your construction loan in Arkansas, I suspect the answer is no. There are some lenders that will "cross-collateralize" a loan against more than one property but these are rare and even these are typically limited to properties within the same county. The equity in your Arkansas land will certainly be considered in the construction loan collateral. I know many lenders who will lend up to 95% of the the total cost of building a new primary. So, if you have 25k in equity in land, and you needed 475k all in for hard and soft costs for the new project imn Arkansas, that would be a total cost of 500k (land plus build) and a max loan of 475K allowing you to bring nothing to the table. Reach out if you need a mortgage broker recommendation in your market that can do this type of loan and blessings on your project!

Super helpful info. Thank you!

Sorry. Not sure i understand the question. You would need to own land to build on it (unless building on leased land which very few lenders will do). You can buy land with a construction loan but that takes a patient seller and a willingness on your part to invest a lot of money into the project for plans, permits, etc before owning land.

350/435 is just a hair over 80%. Almost any construction lender can do that. Many can go over 80%. Go to mortgagematchup.com to find a great broker.

@@MortgageMasteryTheater Thank you! I also plan to put down $150K down in cash. I should be in a good position I think. Thank you for the information.

Sounds like maybe you subdivided and created a buildable lot? If so, did the mortgage lien attached to both resulting lots (the one with the house and the one without?). If you have owned the land for more than a year, then the "cost" of the land for loan to cost calculation purposes is the current appraised value (determined by the construction loan appraisal). If the properties are subdivided, then the lot with the house probably won't be included in the loan (i.e, won't be used as security for the construction loan). Feel free to call to chat about this further. 206-999-6941. PDT.

Thank you!

Good presentation I understand no one's getting many good deals for ARMs. But if someone were getting a deal on a 3/1 ARM (0.75% less rate compared to 30 year fixed) it is a good option in current environment considering the general expectation that rates come down (based on yield curve you showed)

Thank you. Typically you get credit for then donor’s holding period which i assume is more than a year. So, land cost would be the fmv for purposes of the loan to cost calculation.

Thank you!

Thank you

Hi TT. I am afraid that I won't be much help with that question. The answer will depend in part on whether it is simply a financial comparison or if your personal / family needs / preferences facor in. If the former, look for a good builder and realtor you can trust and get their input. Best of luck. Sounds like a great project.

Glad it was helpful!

Hi Karen. Land equity for a down payment is compulsory for a construction loan like gravity is compulsory for a fall. The value of the land is automatically included in the total cost of project. If the land's value is 250K (and has been owned by you for a year or more), the total cost would be 450+250+ soft costs (sorry, no idea what those will be). If you wanted to bring zero cash to the deal, you would borrow 450+soft costs (say 30k). or 480. Your loan to value would be 480/700 or 68%. Your "down payment" would be 32%. Most banks should go that high and higher. If you did not want to borrow that much, just lower your loan amount request and bring that cash to the table at closing. Hope this is helpful.

One thing is that, before we paid off our land, the bank suggested we don’t pay it off that we owed 80k. I still don’t understand why. Is there a reason why the bank didn’t encourage us to pay off our land prior to getting a construction loan?

@@KareNEexpert May be just a practical consideration. At the end of day, you are managing how much cash you put into the deal by choosing a loan amount. The bank may just be thinking it is easier for them to verify that the lien is cleared if you let escrow pay if off.

@@MortgageMasteryTheater Thank you for clarifying. I was suspicious at first thinking they didn't want us to pay it off so they could rip us off.

Thanks!

That is brutal. Sorry to hear.

Hi. Thanks for watching. I think you have precisely identified the risk of doing too much before you get lender preapproval. Some risks are inevitable since you do have to spend money to get to the point where your proposed project can be appraised (architecs, plans, etc)

@@MortgageMasteryTheater I understand risk is a big part of a build. But the part i have a problem is: I can't get any solid numbers before spending cash. For example, I have a half acre picked out (my mother is selling it to me cheap). I have a house from ValueBuilds picked out (with a baseline estimate, without customizations. And a pre approved 300k loan. I've lined up as many dominos as I can. BUT...no one can tell me how much the house will be with the customizations i want (that are options on the prebuilt plan), or how much it will cost to prepare the land. Once i have more defined numbers, I have no problem going all in on this. But I can't seem to get more than "welllllll lets see what happens."

@@Winterborn5 Don't know how many builders and subs are in your area. Hopefully you can find someone that can provide a reasonably reliable estimate. Best to you.

Thanks Team Schroeder! Helpful comments.

Check with your specific lender but most should give you credit for the donors holding period and therefore giving you full fair market value of the land in your loan to cost calculation.

@@MortgageMasteryTheater Thank you

Another quick question. If I own my land 100%, is it normal for a builder to ask for earnest money down? I thought I wouldn't need to give money down since I own my land

@@fernandogarza661 Most builders are going to require advance deposits. They have to buy materials and invest time to prep for hte project.

@@MortgageMasteryTheater thank you

Hi Jonathan. You should verify anything I say with your actual lender as construction loan guidelines are not as uniform as general fannie / freddie guidelines. That said, most lenders will attribute the donor's ownership period to you and value the land at the appraised value of the land in your loan to cost calculation. In your case, you have owned it more than a year since to either way, you get the fmv of the land included in your cost basis.

Thank you! Sounds right since the appraised value is lower than the cost and would be used. Assumes you have not prepaid for anything. If not too late, you might try findamortgagebroker.com for a lender experienced in construction who is sure to have a product that goes to 95% on an owner occupied loan.

Hi. I am afraid that I can't offer any legal advice. There is what is conventionally known as a "due on sale" clause in your deed of trust. The actual language refers to a transfer of beneficial interest and many interpret this to include transfers from an individual to a single member llc. I would seek legal counsel to determine if you can do this wihtout triggering the due on sale clause. You could also reach out to your current servicing company (the bank you are sending the payments to) and ask them but I expect you will get inconclusive advice at best.

Thanks for watching Ricky. I agree with you about the need for a general contractor. I don’t recall suggesting otherwise in this video. Thanks for the opportunity to clarify if i did.

@@MortgageMasteryTheater We did our house as owner builder - but had a lot of skin in the game (50/50). I would not discourage anyone from trying to get an owner/builder loan. I think the biggest drawback is that you really really need to get a good handle on the build cost as you are borrowing the money up front. Great video.

@@user-po7cq6cl2z Thank you. Great to hear. Love to know where you got your money (community bank, national big box bank, local broker? Also, what were the most important things you did to get the lender comfortable? What kind of experience did you have to demonstrate ability to manage the project well? Looking forward to learning more.

@@MortgageMasteryTheater It was a regional Bank in PA and the house was in NVA. They were our construction lender on our first house. We had a contractor who skipped after the first draw of 10% and the bank declared that we were now an owner builder. We finished the first house - although it took a year and we had a 6 month construction loan. We built our present house after buying a lot in a more upscale community but could not find a builder we would trust to build a birdhouse (I used to say doghouse but I think even that would be too challenging for them). That's why I responded as I would not want to discourage anyone from doing this. Builders build for money but an owner builder builds for love. This is not rocket science. The lot was worth more than the construction loan, our income and credit would have justified a much higher loan and we had to cash to upfront the start of the build as the bank gives you the draws in arrears. They needed to see signed, notarized lean releases from the subs before they would cut the draw and the subs needed to be paid before they signed the releases.

I believe so. I never learned of the final outcome but i do know she had no standing to file a claim.

@@MortgageMasteryTheater gotchya, thanks!

Thanks Randy! Some lenders will allow you to do a constructioin loan with new VA loan assuming the sale of your current home once construction is completed. This is a lender by lender decision so best to address specifically with yours. Probably worth calling around if you get a no from your first choice

I don't know if there are any restrictions on a VA loan, but have you looked into getting a home equity loan on your current property? You can then draw down on the HELOC for cash. The HELOC is paid off from the proceeds of the sale when you sell the house. You would have the additional interest costs, of course, on the HELOC (that is, the portion of the line of credit you use).

@@accuratecalcs yes that is the route I’m thinking about going… use the equity I have.

It definitely helps but I have helped sub-millionaires do it as well. Thanks for watching!

Hi Kyle. Sounds like a great project. I am not versed in commercial construction lending but as long as you qualify for enough loan to cover the debt payoff and all the build costs you need, shouldn't be a problem having the loan pay off the lien.

Thanks so much Steve. Blessings on your project. Expecting you to pick me up at the Creede helipad and take me skiing. :)

That must be incredibly challeging. I hope you can find good and affordable coverage soon. Please let me know what you learn.

Gavin Newsome for president!!!

You're welcome!

This is what I was looking for!! There isn’t any debt owed on my land. If my dad is gifting me the land would that mean I would own it for less than a year even if he’s had it for way longer?

@@user-wo9nc3eu2s As long as you have clear Title to the land that's gifted, and you are financing new construction, nothing will stop you from proceeding! Good luck!

Can I put a down payment without a land as collateral?

Sorry - I have very little experience with Encompass.

Hi Casper. Sounds like a fun project. If I am understanding that you own the land free and clear and need 600k to pay your builder 600k including all soft costs (permits, etc), your cost basis would be 850k (assuming your land estimate is accurate). If you wanted to put zero cash into the deal, borrowing 600k would be a loan to cost of right about 70% (assuming is appraises for at least 850k). Most. construction lenders would do this. If you are in WA or ID, give me a call. Otherwise, go to findamortgagebroker.com and find a great broker. Be sure to get one with construction loan experience.

@@MortgageMasteryTheater thank you for your response. I live in Atlanta though. I will be shopping around this month for a loan.

That depends on a few factors. What is the land worth today? What do you owe on the land? What do you expect the completed house to appraise for?

@MortgageMasteryTheater we had a land loan that we recently paid off a few months ago free and clear. But we do not know how much it could be worth today and how much it would appraise for completed. I was thinking of saving up more especially since these interest rates are through the roof. So when things start to settle down. We can move forward and build with a peace of mind knowing we would be financially prepared

@@kednerfrancois7420 Great job on getting that paid off. Basically, let's say that the land is worth what you paid (80K) and the house adds 532k in value. The appraised value would equal the costs at 612k. If you needed 532k to build plus 10k in closing costs, you would need to borrow 542k. This is about 88,5% of the lower of the cost/value (both 612k in our example). I have construction lenders that would lend you up to 95% of the lower of cost/value so you should be able to do this project without putting any additional cash into the deal.

@@MortgageMasteryTheater Thank you for clarifying it for me. And at the moment I think I would continue to save funds until me and my wife are ready to push forward with the build but I'll keep that in mind.