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Building New Construction Homes 馃彔 How to Get Financing / Loans | MELANIE 鉂わ笍 TAMPA BAY - YouTube
Channel: Melanie Loves Tampa Bay
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many of you out there want to build that
dream home but you're gonna need to pay
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for it so today on this episode of
Melanie Loves Tampa Bay I've brought in
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an expert in construction loans to talk
to you about getting financing for your
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dream home Melanie Atkinson here a
realtor with Smith & Associates in
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beautiful Tampa Bay Florida and today I
am joined with Shawn Eckley vice
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president at BB&T and construction loan
expert
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thank you so much for joining me today
Shawn I know when I built my custom home
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I had lots and lots of questions and you
were my lender and you answered all of
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them so I'm very excited to have you
here today to explain to everybody out
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there how to do a construction loan
Melanie thank you very much for having
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me today hopefully by the end of the
segment I'll have an answer to all
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questions that you have as far as how to
build your dream home and how to get it
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financed so Shawn let's start from the
very beginning what is a construction
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firm loan and why would I need one okay
well there's a couple reasons why you
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would get a construction firm loan
actually there's two two different kinds
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of construction per meter you can own
your own lot you can find your own
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builder and finance that way or you can
go and find your own lot in a
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neighborhood and then have a builder
come in and build that for you so those
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are two different kinds of construction
so if I'm a buyer and I find a lot how
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do i buy that lot without having to pay
cash for that lot if I don't have a
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builder normally what you would do is
put a contract on the lot just like you
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were for regular purchase you'll have to
have a builder lined up and we can talk
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about that a little bit as well it's
what you have to do but you basically
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have to sign a contract with the Builder
what the home is gonna be like we put
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the home and a lot together that's how
we get the home appraised and then you
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just put your down payment based on the
overall project together okay so you do
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have to figure out the Builder though
absolutely okay so let's talk about that
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process because I know you work with a
lot of builders what should somebody
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look for when they're looking for a
builder for me I would probably start
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with whoever builds locally you
obviously want to have someone who
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builds local who knows the area you know
preferably talk to someone who's having
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their home built or has had their home
completed by that builder
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that's another good way of finding that
as well but I mean there's a lot of
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builders to choose from so I just say
pick them pick them wisely but the best
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way to do that is just do some research
and talk to some folks around that our
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building currently so would it make
sense for buyers to interview builders
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prior to even going lot shopping yes I
believe so because if you go ahead and
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put a contract on a lot you're only
gonna have 45 days or maybe 60 days tops
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it's probably going to take you that or
even longer to find the Builder you know
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and yeah and to then have a pick out a
house and the costs and everything else
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so one of the things that I noticed
again in South Tampa and I'm not sure
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how much this is around the country is a
lot of builders actually own the Lots so
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you'll drive past the vacant lot and
think okay I want to buy that but it's
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already owned by a builder and they're
busy trying to find somebody to actually
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construct the house that's what the
situation was when I built my custom
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home so the Builder was already attached
a lot so when we went to get the
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construction loan that piece of the
puzzle was already done so it made it a
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little bit faster so let's talk about
doing the construction loan from that
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assuming you have the Builder picked out
and you have the lot what's a typical
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down payment on a construction loan it's
normally 20% down up to a loan of around
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a million and then we'll go to normally
an extra 5% down really the main reason
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is a lot of lenders have gone away from
doing 10% down payments is because it's
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tough to get mortgage insurance which is
the gap you know if you don't have a 20%
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down on large deals like that because
the home really isn't completed that the
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lender until the homeless is done and
you're right there's no collateral for
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the lender while the home is being
constructed yes so that's a risk for the
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lender I have the 20% down I find a lot
I have the Builder what happens next
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once we have your loan application
taking I'll go ahead and get the the
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contract on the lot as well as with the
build we'll send that have the home
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appraised in the meantime we'll work on
underwriting those will come together at
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the same time your loan is approved in
the new clothes okay so your closing and
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there's no house on there so you're
essentially closing on a blank piece of
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land that is correct which can feel a
little bit strange
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yeah well the good thing is is we're
doing it based on like if your home is
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completed today so if you have contract
for a million dollars we have the land
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plus the construction together and then
we appraise it based on that we'll also
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do an appraisal when the home is
complete to make sure the square footage
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is correct as well so yes and is it is
kind of an odd concept but that's that's
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the way to do it and we do have one
closing up front too so I just want to
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touch on that so you have one closing
upfront so once you close you'll
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actually own the land as well which is
another good reason why you do
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construction loan because a lot of
people don't want to give a large down
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payment to a builder and they don't own
anything a lot of people still own a
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current house or they're leasing
whenever their house is being
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constructed constructed they have to
live somewhere but it's nerve-racking
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for people to have two payments you feel
like you're going to be paying a lot of
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money for the construction loan as well
as a mortgage or lease on top of it so
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how does a construction loan work
because the reality of it isn't as scary
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as what you might think well what we do
is it's I almost think of it as like a
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line of credit so you only pay on what
money's been borrowed so suppose the the
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first drawl is a hundred thousand you
would pay interest only based on those
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payments and is the home is built and
the the Builder takes out additional
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funds and then it would increase
accordingly so its interest only
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interest only during the build right and
so you you made an important point there
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the draws so let's specifically talk
about the draws and how they work every
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builder has different you know draw a
schedule of how they like we will work
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with them individually as far as what
they want but at the same time it's
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pretty much all the same it's a slab
your walls go up your roof or your
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interior and a final there might be some
in between depending on if you live in
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the and the water if you have a dock you
have a pool and things like that but
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majority of the time those are the five
main draws that we have to the building
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okay so a draw just to generally define
a draw is basically you have a loan of X
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amount of dollars and the builders
taking out what they need to pay the
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cost so far that is correct so they're
using it as like a piggy bank that is
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correct and one of the things that I I
was nervous about what you were talking
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about drawers and that was intimidating
to me because I didn't understand how I
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would as the the person taking out the
loan would manage this but I didn't have
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to manage them you guys managed
so you had the inspections and you did
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the drawers and I'd other than signing
the piece of paper I didn't have to do
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anything we give a lot of options for
that so normally what will happen is is
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as long as someone calls us by Tuesday
at noon we'll have someone out there on
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Wednesday for the draw but Thursday
we're clearing everything make sure that
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all the notice owners are taken care of
and there's no liens or anything like
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that on the property then we'll pay
normally on a Friday afternoon but but
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we have someone who is licensed who will
go out there and do the inspections for
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us and if the work is not complete then
they won't get compensated right so the
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builders calling you for a JA yes you go
out and make sure the Builder did what
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they said they did and then you pay them
so let's talk a little bit about other
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uses of construction loans do you ever
do construction loans for a big remodel
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yes absolutely you know depending on
what area you're in obviously South
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Tampa there's a lot of homes have been
established so someone owes maybe 500 on
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their house they want to do another
remodel of 300 and then we would
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basically pay off the existing mortgage
and do the same it'll close upfront and
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then make draws as we go the other which
is pretty popular to see if someone's
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buying home that's this older that needs
to be fixed up we'll do a purchase so
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we'll get a contract with the Builder as
well to do upgrades or add square
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footage to it and you'll actually close
just like you would for a regular
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construction loan upfront that we would
do the drawers and then when those are
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done so that's really an important point
so we have a lot of older homes here in
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Tampa that are expensive so say we're
talking about a bungalow in Hyde Park
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that cost $600,000 straight from the
beginning and needs a lot of repair you
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want to do an addition so you would do a
loan that has that mortgage in it and
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then also some money for the renovation
as well yeah so what we do just a
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typical so if you say 600 for the
purchase price 400 for the build for
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them the gut house it would be a million
they would need 20% down they would need
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200,000 but we would go ahead and close
on that pay off the existing lien or the
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seller the money for the 400 would be
put in an account where we would pull
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that out and pay the Builder as he goes
and then you know hopefully six nine
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months a large renovation will be done
and the
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their home and then the mortgage will
just be the the value of the house of
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the original house plus the the remodels
so the the million dollars whatever we
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were estimating that Spee that that's
great I don't necessarily think that
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that's something that people think I
think they look at a big remodel and and
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get overwhelmed by the scale of it and
and don't actually realize that they can
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roll all of that in so that's great is
there kind of a minimum for a remodel
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well it can't be really anything there's
not really a dollar figure per se but if
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you have a remodel that's you know
thirty thousand dollars you probably
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don't want to roll that into there
because of the cost involved but I would
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say if you're redoing your kitchen roof
things like that we can definitely
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include there we do we do a lot of them
notes I probably say that probably
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thirty percent of my businesses remodels
and also purchase remodels as well when
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the construction process is done what
happens then how does that convert into
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a permanent loan okay so within 30 days
of your home being completing you
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getting the CEO someone will give us a
call whether it be the Builder or the
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borrower and say here homeless is done
so at that point we'll get you set up on
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your homeowners insurance and then we'll
basically make sure that all your
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paperwork is ready your lock is all
complete completed and done rate is done
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and all the the bills have been paid
from the Builder
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there's no liens on the property and so
forth and then we'll actually close that
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loan out you pay any interim interest
you owe just like if you had an
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apartment and we closed in the middle of
the month we also get your escrow
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started at that time and then you will
basically have a permanent loan from
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then on so if you have a thirty year
fixed for example that's when you're 30
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or fixed payments will start and that's
when you start paying principal and
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interest that is correct okay so that's
that part of it is like a regular loan
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you're just closing out the construction
line so you technically have two
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closings in a construction perm loan you
have the first one where you start the
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construction part of the loan and then
you have the final one well turns it
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into a regular loan yeah and the final
one the only fees that you would really
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have would be the Internet interest
starting your escrows if there's any
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title updates at the very end you don't
have to wreak wala fie so you would go
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back to the total company just because
you're signing on your final loan Docs
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but there's not actually a full closing
where you pay docx stamps and things
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like that right well right so it doesn't
cost as much as the
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first summer that is correct right
because you do have your closing costs
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in the beginning not necessarily at the
end so what type of loan products do you
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offer for construction perm loans so on
the fixed rates we have a 30 and a 15
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year so what we would do is we would
basically lock them into a rate kind of
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a worst case scenario rate then within
30 days of the home being done we will
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look at the rate and it would never be
higher than the rate you would get
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during the build but can always go lower
it's called a free float down okay so
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that's nice so if interest rates go down
so yeah if the rates go down and then as
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far as other programs we have arms we
have a ten seven and five-year arm so
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they're based on 30-year fixed payments
but they would be fixed for ten seven or
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five-year programs but but you do not
get a float down so once you get that
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rate when you close upfront that's the
rate you would have for my arm you mean
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adjustable rate mortgage that is correct
okay so that means after five years it
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will would adjust annually from there
for most people I assume assuming rates
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are good if they're planning on building
a beautiful house and staying in it
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would you typically recommend a fixed or
an arm well it just it all depends on
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their financial situation if they say
hey this is my last home then we'll
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probably look at a 15-year fix but but a
lot of the larger loans that we do over
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1.5 they tend to go to the 10-year arm
because it's a lower rate and they know
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they're not going to be in the home
longer than 10 years so say somebody out
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there wants to do a construction loan
with you
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we're obviously you're in Florida but do
you can you do construction loans
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anywhere anywhere that BBT has an office
I can do those loans okay so I believe
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there's 13 States although up to New
Jersey over to Texas okay but I do a lot
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of loans obviously in Florida but we do
a lot of loans in Georgia North Carolina
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South Carolina as well a lot of second
homes people building our lakes and so
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forth so we do a lot of those so you
don't actually have to be local to use
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you know okay fantastic if any of you
want to contact Shawn Eckley to help with
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your construction permit all of his
contact information in the description
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box thank you Shawn so much for being
here all the information was really
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helpful if you like this video please
click the like button below or consider
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more information about home trends real
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estate or life in the Tampa Bay area you
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Melanie loves tampabay calm thank you so
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much for joining me and I look forward
to seeing next time with love Melanie
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