Financing your build.

Another question I get a lot is: “What will the bank require to get a loan?”

The bank will require the usual financial information, such as proof of income, income tax returns, etc. In addition, the bank is understandably interested in collateral, which is the home that is yet to be built. The bank will want to see:

  • A set of plans (including a survey)
  • A set of Specifications (what is inside your home specifically)
  • A builder who has been validated by that bank (we're approved by everyone in Austin)
  • An appraisal (An independent 3rd party puts a value on your plans and specifications)
  • The amount of money they are lending you to be within their guidelines, which are called Loan to Value, or LTV. It would look like this if a bank had a 90% LTV:

Property cost - $300,000
Construction costs (everything from plans, nails, and the kitchen sink) - $350,000
Down payment - $65,000
Appraisal - $700,000

This leaves you at an LTV of 83.6%, (300,000 + 350,000 - 65,000 = 585,000. 585,000 is 83.6% of 700,000) so in this case the bank would do the loan.