New Construction Loans for Investors Without the Hassle

A new construction loan can fund both the lot acquisition cost and the actual construction on the lot. Lima One funds vertical construction including ground-up new builds and tear down/rebuild projects. Lima One does not fund horizontal construction, which means land must be properly zoned, and municipal utilities must be lateral ready for the property to qualify. Lima One requires investors who take out new construction loans to have experience with ground-up projects, either on title, as a general contractor, or with fix and flip projects. A Lima One loan consultant can help investors analyze their specific experience to see if they qualify for construction financing. Completing the borrower underwriting steps will enable Lima One to close construction loans more quickly when a loan is submitted.

The key parts of preapproval for a Lima One construction loan can happen with or without an actual build that is ready to start. First, a borrower must qualify for a new construction loan based on experience with new construction, either on title or as a general contractor, or with fix and flip projects. Second, a borrower must demonstrate liquid assets so Lima One can establish a credit exposure limit. This limit is valid for six months and can apply to one project or multiple projects. Third, a borrower will need to agree to a soft credit score pull. Note that a hard credit pull will be required once a loan is submitted.

For the most experienced builders, Lima One will cover up to 85% of the blended costs of a build. This includes up to 100% of the construction costs and up to 60% of the lot costs. Borrowers with less experience should expect to put more money down at the start of a loan.

A construction to permanent loan solution is designed for a build-to-rent project. The construction loan covers the build, and then the borrower refinances into a DSCR loan to hold the property as a rental once a tenant is in place. Lima One’s Build2Rent® loan program offers both types of loans, with no seasoning required to refinance into a rental loan. It also offers an origination fee discount for the rental loan.

A borrower will need to provide building plans, a line-item construction budget, and other documentation via a property application. Lima One’s in-house team will review the budget to ensure it is sufficient and appropriate for the project in view. Lima One will also conduct a general contractor review as part of the underwriting process.

Lima One new construction loans have a standard length of 13 months. 19-month terms are also available.

Foreign nationals can qualify for ground-up construction loans, even if they do not have an established credit score. A Lima One loan consultant can provide more information about what a foreign national or permanent resident alien needs to do for borrower underwriting.

For additional questions and answers regarding ground up construction loans and financing, check out the in-depth FAQ here.