CONSTRUCTION LOAN
A construction loan is a type of short-term loan specifically designed to finance the construction of a new building or significant renovations to an existing property. Unlike a traditional mortgage, which is used to purchase an already-built home, a construction loan provides funds in stages as the construction progresses.
The loan is fixed or variable for up to 3 years with interest-only amortization. The loan is due at the end of the 1 to 3-year term. No prepayment penalty in most cases. Eligible properties include multifamily 5+ units, 1-4 unit residential, condos, office, retail, industrial, manufactured housing, self-storage, hotels, and healthcare.
Construction Loans are short-term interim loans designed for new construction and major rehab projects before securing long-term financing or disposition.
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Required Documents for Loan Review
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Sponsor resume/track record
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Sponsor personal financial statement
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Project scope of work/budget
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Builder resume/track record
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Loan Criteria
Leverage:
Ground-Up: Max ARV: 65% | Max LTC: 80% | Build Cost:100% | Min Credit: 650
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Rehab: Max ARV: 75% | Max LTC: 85% | Build Cost: 100% | Min Credit: 650
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Rate:
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The starting rate a Prime + 2%. Rates are project-specific and heavily based on sponsor experience.
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Loan Amount:
Ground-Up: $250K to $100MM+
Rehab: $150k+
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Reserve account:
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A reserve account will be used to make monthly payments on behalf of the Borrower until the construction phase is finished and the property is ready for take-out financing.
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Occupancy:
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Owner-occupied residential developments, investment properties, commercial owner-user.
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Property Type:
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Most property types are considered. Multifamily, office, retail, industrial, mixed-use, specialty use, 1-4 unit residential.
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Liquidity:
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Minimum 10% of project budget + minimum 6-months interest reserves
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Property Type:
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Most property types are considered. Multifamily, office, retail, industrial, mixed-use, specialty use, 1-4 unit residential.
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