Most people understand how traditional mortgages work: homes are acquired through a combination of the buyer's cash contribution and the lender's contribution, or "mortgage." Construction loans are related to traditional mortgages, but distributed differently.
As opposed to issuing the entirety of a debt at once, construction lenders issue debt in parallel with certain progress milestones. Additionally, construction loans are typically distributed after all the borrower's cash equity (closed on escrow at construction loan closing) is used by initial progress payments.
Determining a viable budget can be a complex analysis for home buyers. The fundamental determinant of how much dept a lender is willing to provide, for construction as well as an existing home purchase, is Loan-to-Value (LTV.) LTV is the proportion of the lower of total project cost or appraised value that the lender is willing to finance through debt.
While Green Street Communities does not provide in-house financing, we have established a network of lending partners who are ready to finance qualified clients. Because of our established partnerships with these lenders, the loan process is a smooth, well practiced process. However, we understand that it is common for our clients to have a pre-existing banking relationship and wish to continue their relationship by acquiring a loan with them. We will work with any lender of your choice to ensure that all necessary materials are delivered to the lender in as rapidly a manner as possible so as to ensure your financing closes on time.