Pre-Sold Construction Financing
In these difficult economic times, we find ourselves with quite a financial dilemma. We are selling homes; however, banks are not lending money for new home construction.
In order to meet the demands of the market for housing, we are turning to private financing by individuals who are seeking a secured investment, with a return at an amount greater than they are experiencing in the traditional investment world.
We are seeking funds to construct homes for our clients, as many are using MSHDA, RDA, FHA or LTO financing which requires a 3 ½ % or less down payment. Typically conventional construction loan lenders are requiring 20 to 30% of the client’s money as a down payment to initiate the construction loan. Our clients who are using the aforementioned loan programs typically do not have the funds required, so therefore they do not qualify for conventional construction loan financing.
Our New Sold Home Construction Financing Program is set up as follows;
A) The Borrower is Eastwood Custom Homes, Inc.
B) The Borrower will order, pay for and provide an appraisal for each home.
C) The Borrower will order, pay for and provide a Title Insurance Policy insuring the Lenders First Mortgage position for each home.
D) The Borrower will provide the Title Company and Lender with Waivers and Sworn Statements for each Draw.
E) All Draws will be based on 80% of the work completed.
F) The Borrower will prepay the Lender 12 months of interest on Sold Homes at the first Construction Loan Draw and monthly thereafter as necessary.
G) Prepaid Interest will be prorated to the date of loan payoff.
H) Terms will be between 12 and 24 months.
I) The Lender holds the first (and only) secured mortgage position on the land and home.
J) Our current interest rate offering is 6%.
K) The Lender will advance to Borrower 80% of the lesser of the Contract Price or Appraised Value.
L) The Lender is paid in full at the closing of the sale.
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