The Anna Maria Island Sun Newspaper

Vol. 13 No. 9 - December 12, 2012

REAL ESTATE

Building a construction loan

 

The American Dream of home ownership is more alive than in recent years with the housing market improving daily. But what about the American Dream of building your own home? Are future homeowners ready to take on the financial risks associated with building from scratch in order to have that once in a lifetime experience of building their dream home?

The first hurdle to overcome, if you’ve decided to take on the thrill of new home construction, is how you pay for it. If you can’t afford to pay for the cost of the construction up front and need to obtain financing, it could be a little tricky. Basically you’re asking a bank or lender to give you money for something that doesn’t exist and to have faith in not only you as the borrower, but also in your contractor.

Construction loans are typically short term loans usually around a year to allow you the time to build your home. Funds required during the construction process are disbursed in the form of a schedule of draws. Interest is due on only the money borrowed as it is disbursed. Then at the end of the construction process, you will need to get a new loan to pay off the construction loan, essentially refinancing into a conventional mortgage.

Usually constructions loans require a pretty sizeable down payment with 20 percent to 30 percent not uncommon. Some lenders are also combining the two loans, the short term loan and the refinanced conventional mortgage, into a single loan product called construction-to-permanent financing. This type of loan does streamline the process and will result in closing cost savings, however, you might be paying an extra quarter to a half percent higher than if you wait to refinance after construction is completed.

Lenders are very careful when handling constructions loans and will impose some strict requirements including, but not restricted to, the following: A qualified licensed builder with an established reputation for building quality homes is essential. If your intention is to build your own home or have an owner/builder arrangement, it could be difficult to get a loan.

You also will have to present detailed specifications including floor plans. Details about the materials being used, ceiling heights and insulation are just some of the required specifications. Based on the specifications and land value, the lender will require an appraisal to verify the completed home will have a value within the same range of similar homes in the surrounding area.

There are serious downsides to building a home, which could be both expensive and inconvenient. If your home is not completed on schedule, you may be required to pay a fee to extend the construction loan or be forced to carry two mortgages. If there is a market adjustment during the construction period and your newly completed home is worth less than anticipated, you may need to come up with extra cash when it comes time to refinance into the end loan. Or if your income or personal finances change during the construction time, you may not be able to qualify for the refinanced loan.

In the final analysis, before you start to build your dream home, make sure you have the funds, security and discipline to weather any financial crisis or setback that is sure to occur. You and your family can live the American Dream in an existing home or in one you built; you’ll have to decide which is best for you.

Real Estate Transactions
Real Estate Transfers from June 1 to June 30, 2012
Sponsored by Alan Galletto Island Real Estate

Sold Date | List Price | Sold Price | Address | Provision | Property Style

Anna Maria

08/31/2012 379,900 348,500 211 Elm Ave # B 749 2 Br/1 Ba Condo
08/03/2012 599,000 548,000 807 Jacaranda Road 2832 62.0x100.0 2 Be/2 Ba SFR
08/10/2012 400,000 380,000 317 Magnolia Ave. 1064 52.0x120.0 3 Br/2 Ba SFR
08/15/2012 800,000 800,000 108 Beach Ave. 2722 150.0x106.04 Br/3.5 Ba SFR
08/15/2012 589,000 565,000 311 Tarpon St. 1022 75.0x110.0 2 Br/2 Ba SFR
08/27/2012 600,000 649,000 212 Palmetto Ave. 1819 52.0x110.0 3 Br/2.5 Ba SFR
08/17/2012 415,000 375,000 300 N Shore Drive 1680 78x100 2Br/2.5Ba Inc, bank owned
08/06/2012 317,000 300,000 812 Jacaranda Road 61.0x108.0 Vac.
08/29/2012 975,000 875,000 749 North Shore Drive 60x125 + Vac.

Bradenton Beach

08/10/2012 115,000 115,000 1603 Gulf N Drive # 25 380 1 Br/1 Ba Condo, bank owned 08/22/2012 125,000 125,000 1603 Gulf N Drive # 28 380 1 Br/1 Ba Condo
08/10/2012 215,000 240,000 2306 Avenue C 1674 50.0x100.0 2 Br/2 Ba Inc., bank owned
08/01/2012 169,900 150,000 2508 Avenue C 50.0x100.0 Vac.
08/01/2012 169,900 150,000 2510 Avenue C 50.0x100.0 Vac.Cortez
08/31/2012 285,000 260,000 9604 Cortez Road # 234 1800 3 Br/ Ba Condo
08/07/2012 295,000 282,000 12416 Baypointe Terr. 139x98 Vac.

Holmes Beach

08/06/2012 349,000 310,000 6400 Flotilla Drive # 46 985 2 Br/2 Ba Condo
08/13/2012 435,000 392,500 7000 Gulf Drive # 206 1259 2 Br/2 Ba Condo
08/13/2012 1,625,000 1,460,000 3302 Gulf Drive # 201 2108 3 Br/2.5 Ba Condo
08/17/2012 425,000 410,000 5200 Gulf Drive # 501 1169 2 Br/2 Ba Condo
08/17/2012 349,900 329,000 3803 E Bay Drive # 9a 1949 3 Br/3 Ba Condo
08/20/2012 279,000 265,000 741 Manatee Ave. # 31 1179 2 Br/2 Ba Condo
08/31/2012 399,900 355,000 100 73rd St. # 101a 660 1 Br/1 Ba Condo
08/01/2012 299,000 280,000 7002 Marina Drive 905 11456 Units 2 Br/1 Ba SFR
08/03/2012 700,000 695,000 513 83rd St. 2519 90.0x103.0 4 Br/3.5Ba SFR
08/13/2012 899,000 885,000 238 S Harbor Drive 1959 2 Br/2 Ba SFR
08/17/2012 269,900 269,900 2711 Gulf Drive 1350 50.0x100.0 2 Br/2 Ba SFR, bank owned
08/21/2012 1,499,000 1,365,000 8401 Marina Drive 3311 94.0x100.0 4 Br/3.5 Ba SFR
08/22/2012 489,000 460,000 504 58th St. 1540 78.0x108.0 3 Br/2 Ba SFR
08/22/2012 427,900 427,900 7001 Holmes Blvd. 1324 88x112 2Br/2Ba SFR
08/23/2012 399,000 386,000 306 72nd St. # A 2616 4 Br/4 Ba SFR, Short Sale
08/24/2012 317,000 290,000 7201 Palm Drive 1134 103x85 2 Br/2 Ba SFR
08/24/2012 498,750 400,000 517 75th St. 1806 90.0x121.0 3 Br/2 Ba SFR
08/24/2012 389,000 382,000 231 S Harbor Drive 1441 2Br/2 Ba SFR
08/29/2012 499,000 475,000 605 Baronet Lane 2000 100x117 4Br/3 Ba SFR, Short Sale
08/31/2012 399,900 315,000 402 73rd St. 1744 3 Br/2 Ba SFR
08/31/2012 389,000 369,000 3009 Avenue E # 2 751 100.0x105.0 2 Br/1 Ba Villa
08/10/2012 559,000 515,000 200 S Harbor Dr # All 2722 94.0x106.0 5 Br/4.5 Ba Inc.

Source: Manatee County Property Appraiser’s Office


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