Applications to fund partially completed construction raise numerous additional questions for lenders. As a broker its important to understand what a lender will be looking for when meeting with the client.
The first question is invariably, how the borrower got themselves into this situation. Was it something within the borrower’s control such as a badly miscalculated construction budget, or poorly managed project? Or was it something external like an existing lender refusing to advance a draw, or problems with material suppliers? Here’s why this distinction is important:
From a lender’s perspective, foreclosure of a partially completed home is challenging at best. So if they are going to advance money to complete the project, they need to be confident that the borrower can get the job done.
So if you’re presented with a borrower request for funds to complete a build, you’re application should address:
- The reason they ran into trouble;
- The market for the product, or possibility of a refinance when it’s done is strong;
- The borrower has a plan for completion including draw request schedule;
- The borrower has a detailed (and believable) budget to complete; and,
- The borrower has the actual ability (including sub-trades) to complete the build.
With this information in hand, you’ll have the best chance of success finding a lender to help finish the project.