Mortgage Blog

Naples Construction Loan

For those who have decided to build a new home, versus buying a new home, a Naples construction mortgage can be obtained. A construction loan is not the same as a standard home mortgage, it is far more complicated and requires the homeowner to take some specific steps. If you are interested in obtaining a Naples Construction Loan, here are some of the details you will have to take into consideration.

The land where the home is to be built

Clearly, if you already own the land, it is much easier to obtain a Naples construction mortgage. However, if you do not already own the land, you will have to provide a copy of your contract showing that you have agreed to purchase the property. In addition, if you are having your home built, you will have to provide complete information from the builder. Builders will be required to submit a full budget with a line-by-line breakdown of costs as well as a schedule.

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How land value impacts your loan

When you apply for a Naples construction loan, your land value will have an impact on your borrowing power. If you already own your property, chances are you can reduce your overall closing costs as well as get credit for the equity already built into the land. When you have to purchase land, your land and building costs will be rolled into one loan. However, your overall loan-to-value will be based on the total completion value of your home including the land. Keep in mind that a Naples construction mortgage does not work in the same way a traditional mortgage loan does.

About the costs of your loan

Fortunately, Naples construction loan terms can be very flexible. Most Naples construction mortgages are two-stage loans. The first phase of the loan is the land purchase and construction for the home. This loan is typically payable to the lender as an interest only loan. Borrowers pay Naples construction mortgage notes based on how much money is drawn, meaning that as different phases of construction are completed, the loan payment goes up. It is important to keep in mind that the maximum construction loan to value is typically set at 70-75 percent of the total completed value.

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Once your home is built

After construction is complete, borrowers will be required to do two things. First, a certificate of occupancy must be completed and then your Naples construction loan must be rolled into a standard mortgage. In most cases, a Naples construction mortgage has a clause that allows you to roll over your loan into a 30 year fixed rate mortgage or an adjustable rate mortgage. The total loan to value ratio for your final mortgage may not exceed 80 percent of the total value of the property or the total costs of building, whichever is lower. Second home borrowers are limited to 75% loan to value. Foreign Nationals loan to value ratio is 70% at this current time.

When you are considering building your home rather than buying an existing home, you will be able to secure your construction loan under very favorable terms.

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This blog is for informational purposes only. Loan programs change daily and constuction terms and conditions can vary depending on underwriting of your loan. This is not a committment to lend or extend credit.

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