Building New Construction Homes 🏠 How to Get Financing / Loans | MELANIE ❤️ TAMPA BAY

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

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9 thoughts on “Building New Construction Homes 🏠 How to Get Financing / Loans | MELANIE ❤️ TAMPA BAY

  1. Contact Shawn Eckley if you are looking into building a new home or buying and remodeling an older home – he is able to service customers in any area where BB&T has an office.

    NMLS ID: 415207

    Mobile: 813.293.8093

    Office: 813.314.3218

    Email: [email protected]

    More about BB&T's construction-to-permanent loan program:

  2. Melanie great videos they are very helpful. One thing I am questioning and not sure if I am missing something from the video. On a new construction home you are putting down 20%, now does that 20% include closing costs as well or are those due at another time? In your video you mentioned everything really taking place at the “first” closing when the 20% is put down. Thanks in advance.

  3. What if I just want to buy a property with a distressed home for a good price, say, 25,000, and then want to put 50,000 towards renovations? What loan do I need?

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