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    New Construction, Ground Up, Rehab, Remodel, Loan, Mortgage, One-close, Construction-perm, low cost, no cost, chicago, northshore, build, construction program, construction loan, construction loan expert, home addition, teardown, land loan, two-flat conversion, jumbo construction loan, interest only

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    CHICAGO CONSTRUCTION LOANS

    NMLS#523638

    847-214-2404

    16 North Spring St

    Elgin, IL 60120

    When should I start the loan application process?

    August 27, 2017

    |

    Ed Currie

    When you should start the loan application process will depend on your scenario and a few factors.  If you are purchasing a property (or lot) at the same time you closing on the construction loan, you should apply as soon as you have an agreement with the seller to buy...

    Read More

    Can I start construction before I close?

    August 25, 2017

    |

    Ed Currie

    Yes you can, but it can complicate things if not done correctly.  At times clients will want to start their project before the loan has closed.  Items to consider are:

    Permits: Permits are not required to close but are required at the first draw.  Be very sure thos...

    Read More

    Do you need to know who my builder is?

    August 14, 2017

    |

    Ed Currie

    Yes. Be sure to communicate as soon a possible the name and contact information of your builder.  It is best to connect the builder and the lender early on in the process so the builder has all the information he or she will need for requirements prior to closing and t...

    Read More

    What are the challenges with buying a property and closing on a construction loan at the same time?

    August 13, 2017

    |

    Ed Currie

    In a word, time.

    Timing is the most stressful part of buying a home and closing on a construction loan at the same time?  Because a construction is based on the completed project, an appraisal needs to be done based on the project. That means you need to have a complete...

    Read More

    General Do’s and Don’ts when applying for a construction loan

    August 12, 2017

    |

    Ed Currie

    Do:

    -Stay in your home

    -Pay your bills, especially your mortgage, on time

    -Use your Credit Cards as normal, keep balances low

    -Stay employed

    Don’t

    -Start projects on home prior to approval

    -Apply for any new credit – loans or credit cards

    -Make a major purchase

    -Consolidate cre...

    Read More

    What does a typical timeline look like on a construction loan?

    August 11, 2017

    |

    Ed Currie

    Everyone’s timeline will be different.  Putting the appraisal aside, it generally will take a week or two to get the loan approved.  The approval of the loan will work concurrently with the appraisal process. 

    The single biggest item that impacts how long it t...

    Read More

    What is the appraisal process?

    August 10, 2017

    |

    Ed Currie

    First, a little background on the relationship banks have with the appraiser.  In today's mortgage world, appraisers are independent.  They are not staff appraisers employed banks or lenders.  They perform each appraisal assignment as independent appraisers.

    T...

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    What if I change my budget after the appraisal is done but before closing?

    August 9, 2017

    |

    Ed Currie

    First and foremost you want to inform your lender that you have made a change.  The budget is the lenders blueprint and payout schedule/template during the construction phase.  Not only is the loan paid out as a whole, but also as individual line items i.e. lumber, ele...

    Read More

    What if my appraisal comes in low?

    August 8, 2017

    |

    Ed Currie

    If the value comes in lower than expected, there are a few remedies to either increase the appraised value or reduce the cash to close needed.

    Appraised Value

    So what happens if you don't like the result of the appraiser's value?  There are two options if you don't like...

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    What needs to be included in a construction contract?

    August 7, 2017

    |

    Ed Currie

    The purpose of this topic is not to give legal advice of what should be in or how a construction contraction should be structured, but instead provide the general info a bank may require in the contract and items that are generally recommended to be in a construction c...

    Read More

    Older Posts >

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    General Do’s and Don’ts when applying for a construction loan

    August 12, 2017

    What does a typical timeline look like on a construction loan?

    August 11, 2017

    What is the appraisal process?

    August 10, 2017

    What if I change my budget after the appraisal is done but before closing?

    August 9, 2017

    How do appraisers determine value?

    July 22, 2017

    What if I can't make the closing?

    July 21, 2017

    What income documentation will be needed?

    July 20, 2017

    Construction Loan Process Overview

    July 12, 2017

    When should I start the loan application process?

    August 27, 2017

    Can I start construction before I close?

    August 25, 2017

    Do you need to know who my builder is?

    August 14, 2017

    What are the challenges with buying a property and closing on a construction loan at the same time?

    August 13, 2017

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    LOAN PROCESS

    The loan process for a construction loan is not much different than a “regular loan”. There are a few additional items that are needed that relate to the construction project and appraisal, but the process and qualifications are very similar. If you qualify for a non-construction loan, you should qualify for a construction loan for a similar amount.

    Most clients will get started on the loan process when the plans and budget are nearing completion. This way, they can get the loan approval out of the way. Once the plans and budget are complete, the appraisal can be ordered. The appraisal for a new construction loan does take longer to complete – 15 to 20 days is a typical timeframe.  Once the appraisal comes back, the client will most likely have a conditional loan approval subject to the appraisal and a few minor items.  Once the appraisal and any other conditions get signed off, closing can be scheduled.

     

    Getting Started

    An initial call with the loan officer is the first step. During that conversation, you will discuss the basics of the loan program and what it means for your specific project. At the end of the call you should have a good understanding of how the program works, how much money you would potentially need for closing, what your payments would look like (both during and after the construction phase), and what the next steps would be.

     

    Application

    The need for a face to face application is no longer needed and very rarely done. Virtually all loan applications are done via phone, email, and fax. Once you have decided to move forward with the application and have sent in the initial items an additional conversation will firm up the loan structure, program type, and interest rate. In many cases, the final loan amount and structure of the loan is not finalized until the appraisal comes back since that may have an impact on the loan.

     

    Documentation

    Documentation requirements vary widely depending on how you earn income and your specific loan request. Initially, just income documentation and a complete mortgage worksheet will be needed to start the loan process. Once the loan is started, additional items will be requested based on your specific financial situation. The following is a list of the types of supporting items that may be needed:

    • Documentation to support income

    • Documentation to support assets needed for down payment and reserves if needed

    • Documentation to support monthly liabilities

    • Construction plans and specs when available

    • Detailed construction budget when available

    • Signed construction contract
       

    Timing

    Timing for the construction loan process is highly dependent on when the plans and budget are available. Because the appraisal is based on the completed project, the appraiser needs the plans and budget to complete it.

     

    There are two separate processes that occur during the construction loan process; loan approval based on income, assets, and credit and the appraisal process. Loan approval can take between two days and two weeks with normal loan volume and the appraisal generally takes 15-20 days from the point the appraisal is ordered. Those two separate processes can take place simultaneously. So if the plans and budget are complete at the time the client applies, a closing in 30 days or less is possible.

     

    If you are purchasing a property that you are doing a construction project on, you want to give yourself extra time in the property contract to get approval and close. It will generally take longer to get the plans done and the budget developed than you think.  Sometimes, if able, it is best to acquire the property first and close on the construction loan at a later date.

     

    Closing

    Once your loan is approved and any and all conditions have been cleared you can close your loan. You will need homeowner’s insurance. The insurance policy will vary depending on your project but may be a standard policy with construction coverage or a separate builder’s risk policy.

     

    If you and your builder have agreed upon a deposit, a deposit of up to 10% of the construction budget can be given at closing.

     

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