Construction Loans for Spec Homes

[Kevin Martin]

Does anyone have much experience with getting these types of loans? Do the lenders require you to own the land to finance the deal? I am doing a little research on the topic and I haven't been able to find much from an investor/builder viewpoint.

[Steve K]

Kevin - I have used construction financing recently. The 85% is the most aggressive number I've seen and it is based on the end value of the home after co. 70% is much more common.

My strategy for taking any bank financing on specs is to agree to roll it into a perm loan at issuance of the CO. This keeps the banks exposure limited and allows me to turn houses into rentals if they don't sell. The lenders I work with seem to like this structure.

My bank isn't in Jacksonville so that isn't going to help. You just need to hit the phones and talk to commercial loan officers at small community banks. One way you can narrow down banks who are lending is by writing down addresses of new construction you see and then searching that in public records. If the builder took a bank loan on the house you'll find out who the bank is by looking at the recorded mortgage.