Our construction lending in Idaho and Utah reached excellent levels, in part because borrowers seem more confident to build new homes, and in part because our small company actually took quite a considerable market share of the residential construction in both states. Our quality of service and dedication to the customer are renowned amongst the building professionals.

We appreciate the trust and loyalty of our customers, and we look forward to new opportunities to serve you in 2012.

You can find the Construction Capital Source page here.

On our Facebook page, we will be regularly posting special discount pricing on loans, loan guideline changes, and other useful information for builders, homeowners, and brokers interested in construction lending.  So it will be a useful tool to those who like our page.

Also, for those of you who have been the recipient of my personal touch of customer service by doing business with me, I would greatly appreciate it if you could post on our wall a short recommendation for CCS, or for me personally.  We want to let everyone know how nice it is to do a construction loan with people who care.

Thank You,

Julie Prince
Construction Capital Source

We at CCS can’t do much to help you with your golf swing, but we can be quite a resourceful partner during the financing of your construction loan.

Let us show you what we can do for you!

Click here to view the embedded video.

Video Transcript:

Hello and Welcome to another chapter in construction lending.  In this video we will give an overview about construction lending in general, a comparison to permanent loans, and a helpful discussion on the differences between the One time and Two time close construction loans.

So first, let’s talk about the general parameters of a construction loan.

A Construction loan is a short term loan that is used to pay for the construction of a project, in our case, a residential house.  Because the collateral has not been built yet, the proceeds from the construction loan are disbursed gradually as the home is built.  Basically the construction loan acts as a big line of credit.  Before the project starts, there is a zero balance. But as the lot is acquired, the foundation is dug and poured, and work commences, money is disbursed from the loan to the subs and suppliers to pay for the work.  As more work is done, the balance of the loan climbs.  When all the work is done, and all the bills are paid, the final balance will get paid off by your long term loan.

Interest on a Construction loan also works just like a line of credit—you only pay interest on what you use, and when you use it.  For example, if you borrow 25,000 the first month for work on the house, your interest is just on that balance, not the entire amount of your construction loan.  Also, the interest payment usually isn’t due each month, but gets paid out of your construction loan, just like a bill for the house.  This is so it is not cumbersome for those still selling their current residences to make two payments.

Video Transcript:

Let’s talk about a couple of differences between a long term mortgage, and a construction loan.  I think it is helpful to understand these differences as you begin the construction loan approval process.

The main difference of the loans centers on the collateral.  As we have discussed, the collateral has not been built yet, so there are different risks that a construction loan has that a long term loan doesn’t.  For instance, when you buy a house, all the money gets transferred to purchase the house, and clear title is transferred, and the 1^st lien position is secured.  On a construction loan, a lot more can go wrong.  There are opportunities for mechanics liens, disbursement issues, and many more opportunities for fraud.  Now there are policies and procedures in place to safeguard these issues, but these types of problems don’t manifest themselves in a long term loan.

Another difference dealing with the collateral is the builder himself.  He is a person that doesn’t guarantee the loan, but is really responsible for building the collateral.  Having problems with your builder can delay the project, jeopardize your budget, and put the project at risk.  It is a good idea to pick your builder wisely.

Something else to note is the interest rate.  The interest rate on a construction loan is important, but since it is only a short term loan, it’s not nearly as important as your long term loan.  For example, on a $300,000 loan, a 1.00% difference for a six month construction loan from 4.5% to 5.5% would be approximately $975.  For the same 300,000 loan, the difference of 0.125% on a 30 year loan from 5.0% to 5.125% would be $8,280.  Many get hung up on the interest rate, when the other features of the loan, like fees, down payment, and flexibility will mean more when it’s all said and done.

Click here to view the embedded video.

Video Transcript:

Welcome to another short video about construction loans.  We’d like to give a short word on owner/builder construction loans, since most lenders don’t do them.

An owner/builder construction loan is a loan where the homeowner is acting as the general contractor on their home.  They can perform the work on the home, or sub everything out just like a general contractor.  Now most lenders won’t lend to owner/builders, as they perceive the projects as too risky.  But at Construction Capital Source, we have had great success with our owner/builder clients, and welcome their loans.

There are a few different requirements on the loan, however, so let’s discuss what those are:

1^st, since there is no general contractor to carry the liability insurance, a personal liability policy must be added to the homeowners insurance in the amount of $300,000 during the construction period.

2^nd, We need to have a letter of experience from the owner/builder, just explaining what experience he or she has to build their home.  If they know absolutely nothing about construction, it is best for them and for us, that they not get in over their heads.

And Last, remember that the documentation that would usually apply to the contractor, such as the builder questionnaire or the contractor’s license, won’t be required.

Now, you can see the complete documentation list for owner builders on the submission form, which can be found under the forms tab on our website, ccsloans.com

And please call in and talk to one of our construction loan experts to talk to us about your project.

Video Transcript:

Back in the day when there were many different products to choose from, this was a better debate.  These days it seems that most people go with the two time close, but let’s discuss the differences.

Both of these loan types are two loans, a construction loan, and a long term loan.  The one time close, however, closes the long term loan up front, with the construction loan, and if everything is done as agreed, will “rollover” to the long term loan when the house is done.

But comparing the fees can be difficult.  You really need to compare the fees of the one time close to a two time close and the following long term loan together to get an accurate comparison.  Generally the one time close will save you on getting appraisal and title work done twice, but has higher fees like modification fees and underwriting fees.  Origination fees usually are the same either way.

As the fees can go either way, usually, you need to look at what long term loan you are getting with the one time close.  Most lenders don’t want to lock in a low rate up front on a 30 or 15 year loan, so they only offer Adjustable Rate loans for the permanent loan, and in this market with such low fixed rates, you definitely don’t want that.  For the lenders that do offer fixed rates, most of the time they are so much higher than market, because of the long term lock, that it really isn’t worth it.

One thing that people often times don’t think about is the flexibility of the construction loan.  Our experience in lending tells us that a project will frequently go over budget and over deadline.  That is just the nature of construction.  On a one time close, there is rarely an option to extend, and if you do extend, the long term loan you closed on is no longer available, causing you to get different long term loan.  Also, extending the loan amount in case of budget overruns is not available in a one time close, but can be with a two time close.

If you are deciding between a one time and a two time close construction loan.  Be sure to call in and talk with one of our experts.  We have a lot of experience with both types, and can hopefully direct you to which would be best for your project.  Thank you for listening to this chapter in construction lending.

Video Outline:

CCS Draw Process

Steps of the draw process:

1. Gather all the invoices to be paid. CCS cannot pay a sub or supplier without an invoice for their work.
2. Make sure that the work has been completed for all the items being invoiced. For bigger trade items, such as lumber, work doesn’t need to be 100% complete to submit a draw.  If our inspection shows 50% complete, for instance, we can pay 50% of the budget.  Some subs will send you an invoice for the work before they are finished, in hopes they can be paid as soon as possible, however, if the CCS inspection does not show the work complete, we cannot pay it.  If you check the invoices to make sure the work has been done before you submit your draw, your draw will go faster, and you won’t have any pay items rejected.  The only exception to this rule would be certain special order items that would require a deposit, such as cabinets.  If you have a question on deposits, feel free to contact the office.
3. Prepare your draw form. A correctly prepared, organized draw form will not only put you in good graces with your disbursement officer, but will get your draw done fast.  Here are the components of the draw form:
   1. Item No. – This refers to the line number of the CCS budget that was provided to you at closing.  Every dollar you request must have an Item Number that corresponds to the category of the budget out of which the money will be disbursed.
   2. Description – This is the name of the category of the budget that corresponds to the Item Number listed.
   3. Payee – This is the name of the sub or supplier to whom the check will be made out.
   4. Tax ID # - For those payees that are sole proprietors or LLCs that are not exempt from 1099 reporting, you need to include their tax ID number.
   5. Address – Mailing address of where you want the check to be sent.
   6. Pick up by payee, borrower – Here you can specify a check to be picked up at our office.
   7. Amount – The amount you are requesting to be disbursed to the payee.  Remember, you cannot request more money that is in the budget line, and you cannot request an amount for work not completed.  Please check that the amount is within those guidelines.  It will help your draw to be processed as fast as possible.
   8. Signatures – The borrower and the builder must sign and date each draw request, unless otherwise arranged with CCS before closing.  For borrowers, please do not sign blank draw sheets for your builders, this leaves you susceptible to fraud.
   9. Typed Draw Form – We have your draw form in an excel spreadsheet, and we recommend that you type the form, just so the addition is correct, and it is legible.
4. Submit your draw. Fax the draw request, and the corresponding invoices to the CCS draw department.  The draw department will check the most current inspection, check your budget, and process the draw as soon as possible.  We have found that an organized and accurate draw will take only 24 – 48 hours on average, while a messy, inaccurate draw usually takes about a week, depending on how many times we have to connect with you to have our questions answered.
5. Other draw tips. Here are some other tips when dealing with draws to make the process go as smooth as possible.
   1. Line Item Transfers - For any line item request that is over the amount in the budget, a line item transfer form must be completed to transfer money into that account before the draw can be processed.  For example, if you have $5,000 in your excavation line item, and your invoice to be paid is $5,500, you will need to transfer $500 from contingency to excavation in order for there to be enough money in that budget.  Line Item Transfer forms were provided to you in your draw packet at closing, and additional forms can be obtained from the office.
   2. Contingency – The contingency account is a buffer account for categories that go over budget.  It is a good practice to transfer all categories that come UNDER budget, and that are finished, to contingency to have a running total of your buffer.  For instance, if you had $10,000 budgeted for concrete, and you only used $9,576, it is recommended to transfer the $424 left into contingency, so that as your project goes along, you have an idea of what you have available for cost overruns.
   3. Reimbursements – If a situation occurs that you pay the sub or supplier from your own funds, and wish to be reimbursed, you need to do the following:

i.      Mark the payee as yourself

ii.      Include the receipt of your payment

iii.      Have the sub or supplier that you paid sign a lien waver form

iv.      Submit with your draw

They need to sign a separate lien waver form because they won’t be cashing a CCS check, which has the lien waver on the back of the check that is binding upon endorsement.

1. 1. Write legibly – Remember that when your draw is faxed to our office and your handwriting is bad, we might not be able to read it, and it will delay your draw.
   2. Correctly add your totals – A quick double check of your addition can also save your draw processing time.
   3. Plan with your inspections – Inspections are performed on the same two days each month.  It is recommended to find out what days your inspections will be performed, and to plan to submit your draws on that day or the day after.  That way there will be no down time waiting for a current inspection.

Video Transcript:

Thank you for tuning in to more construction loan tips by Construction Capital Source, the construction lending experts.  In this video, we wanted to share a tip on disbursing the construction proceeds that, as I’m sure you noticed in the title of the video, could pay dividends down the road.

Most of the time, you will submit a draw with invoices from your subs and suppliers to be paid, and upon underwriting the draw, we will pay them by a lien waver check, which gets mailed to them, or delivered by you.  And there is nothing wrong with that.

But, for those of you who are a little more active in the management of your loan, you could rack up rewards points on a few credit cards that could be pretty substantial by the time you are done.  Here’s how to do it.

First, pay for whatever materials and labor you can with your favorite rewards credit card.  Some companies won’t take credit cards, so you won’t be able to do it for everything, but a lot will.  Appliances, Flooring, Lighting Fixtures, Plumbing Fixtures, even cabinets, countertops, fireplaces, garage doors, and many other things, in fact, if you set up accounts as a builder, some lumber shops and warehouse stores will even accept credit cards on your account.

Second, have the supplier sign a lien waver form.  Normally, when we pay the sub or supplier with a CCS check, the lien waver is on the back of the check, and gets signed when they endorse it.  Since they will not be cashing a CCS check, you will need to have them sign a separate lien waver form.  We give you a stack of those forms in your draw packet, and we can always give you more.

Third, submit your draw request with the receipts and signed lien waver forms, and upon underwriting the draw, you will be reimbursed from your loan.  You can then use that to pay off your credit card when the statement comes.  It’s that easy.  You will find that you can rack up thousands of points that can be used for pretty much anything these days.  In fact, not only will you accumulate rewards points, but you will save in interest on your construction loan by using your credit card’s 30 day grace period interest free.  We’ve had clients go to Hawaii, furnish their living room, and go on cruises with their points, and I can’t think of anything better than a vacation after the stress of building a house.

Thanks for watching, and remember to choose Construction Capital Source, the construction loan experts, for your next building project.