A Mortgage Resource for New Construction and Renovation Projects
Builders and contractors often meet homeowners and buyers at the point where a financing decision becomes critical.
A client may want to:
At Capital Funding Mortgage, we work with builders, contractors, and their clients throughout Pennsylvania and New Jersey to help evaluate financing options before construction begins.
I’m John Madden, owner of Capital Funding Mortgage, and I have been originating mortgages since 1999.
My role is to help your client understand the financing side of the project so that the mortgage, construction budget, and closing timeline are aligned as early as possible.
One of the most frustrating situations in a construction project is discovering late in the process that the borrower’s financing does not fit the proposed project.
That can happen because of:
Early mortgage planning can help identify those issues before significant time and money are spent.
Clients building a new home may have several financing needs.
They may need to:
We can help review the structure and determine which programs may be available.
A one-time close construction loan can combine the construction financing and permanent mortgage into a single transaction.
Depending on the program, this may allow the borrower to:
The exact structure varies by lender and program.
Some borrowers may be better suited for a traditional two-close construction structure, while others may benefit from a one-time close option.
We can help evaluate both.
A borrower who already owns the land may be able to use available lot equity toward the transaction.
That can be valuable because existing equity may reduce the amount of additional cash the borrower needs to contribute.
The lender will generally need to review:
We can help the client understand how the lot may fit into the financing structure.
Some clients have not yet purchased the land.
Depending upon the loan program, it may be possible to finance the lot purchase and construction as part of the same transaction.
The borrower should understand:
The earlier the financing is reviewed, the easier it is to structure the transaction appropriately.
Construction lenders typically need information about the builder.
Requirements vary by program, but may include:
Builders who have worked with construction lenders before are often familiar with this process.
For clients and contractors who have not, we can help explain what the lender is likely to request.
The lender generally needs a clear picture of what is being built and how much it will cost.
That often includes:
The appraisal is typically based on the anticipated value of the home once construction is complete.
That completed-value appraisal can be a major factor in the final loan structure.
Construction funds are generally not released to the builder all at once.
Instead, funds are typically disbursed in stages as work is completed.
A typical draw schedule may correspond with:
Inspections are usually required before each draw is released.
The exact process varies by lender.
We can help the borrower understand the draw process before construction begins.
Construction projects often change.
Clients upgrade finishes, alter plans, or encounter unexpected costs.
Those changes can affect financing.
A borrower should understand that lender-approved construction budgets may not automatically increase because the client decides to add:
It is important to have adequate contingency funds and to discuss major changes before assuming they can be financed.
Higher-cost custom homes may require jumbo construction financing.
Jumbo construction loans may have different requirements for:
We can evaluate available options based on the client’s financial profile and the scope of the project.
Many custom-home buyers and renovation clients are business owners or self-employed professionals.
These borrowers may have:
We can review the client’s income early and determine whether traditional underwriting works or whether another available financing approach should be considered.
Not every client wants to build a home from the ground up.
Many buyers find a property they like but want to make substantial improvements.
A renovation loan may allow the borrower to finance the purchase and approved renovation costs together, depending on the program.
Potential projects may include:
A traditional mortgage is often based primarily on the property’s current condition and value.
That can create a problem when a buyer wants to purchase a home requiring significant improvements.
A renovation loan may allow financing to consider the anticipated value of the property after approved improvements are completed.
This can help a buyer avoid:
The program must fit both the borrower and the property.
Homeowners may also want to renovate a property they already own.
Possible financing options may include:
The best structure depends on:
We can help compare those options.
A contractor may spend considerable time preparing:
before discovering that the client cannot finance the project as proposed.
Early mortgage review can help determine:
That can save time for both the contractor and the homeowner.
When you refer a client to a mortgage professional, your reputation is part of that introduction.
I understand that.
My goal is to communicate clearly and avoid creating unnecessary confusion between the borrower, builder, and lender.
If there is a financing issue, I want to identify it early and explain it directly.
That helps protect the relationship you have built with your client.
When you refer a client to Capital Funding Mortgage, they work directly with me.
I personally help review:
If the transaction is complicated, I stay involved.
Capital Funding Mortgage works with multiple wholesale lenders.
That can be especially helpful with construction and renovation financing because program guidelines can vary significantly.
One lender may have a better fit for:
Our goal is to find the program that fits the transaction rather than forcing the transaction into one lender’s guidelines.
We can help when your client is:
You do not need to become a construction-loan expert.
You simply need a mortgage professional who can help your client understand the financing requirements and coordinate with the lender.
We are available to help before the client signs a construction contract, purchases a lot, or commits to a large renovation.
If you are a builder, general contractor, remodeler, architect, or design-build professional in Pennsylvania or New Jersey, I would welcome the opportunity to serve as a mortgage resource for you and your clients.
Contact John Madden at Capital Funding Mortgage to discuss a project or a client’s financing needs.
Capital Funding Mortgage
Financing solutions for new construction, renovation, and the clients you help build for.
