Financing Partially Completed Construction
When a borrower needs to finance partially completed construction, it generally sends up warning flags for most lenders.
The need to finance partially completed construction can raise many questions as well. As a broker, it’s important to understand what a lender will be looking for and what they need to know when they meet with the client.
The first question the lender will pose will invariably be, how did the borrower find themselves in this situation? Was it something within their control, such as a miscalculated budget or a poorly managed project? Or was it something external, like an existing lender refusing to advance a draw or problems with material suppliers?
It’s going to be incredibly important to make this distinction.
If a lender is going to advance money to complete a project, they’re going to need to be confident that the borrower can get the job done. It goes without saying that from a lending standpoint that a foreclosure of a partially completed home is challenging at best.
So, when you have a borrower looking for funds to finish partially completed construction, ensure the application addresses:
- The reason they ran into trouble
- The market for the product, or that the possibility for refinance upon completion is strong
- That the borrower has a plan for completion including a draw request schedule
- The borrower has a detailed (and realistic) budget to complete the project
- The borrower has the ability (including sub-trades) to complete the build.
With detailed answers to these questions, you’ll have the best chance of success in finding a lender that will help the borrower complete their project.
And if you have questions, contact the lending experts at Kokanee Mortgage. Our decades of experience has given us the skills and knowledge to deliver lending solutions where others may shy away.
