“Here Are The The Typical Bank Eligibility Requirements For Construction Draw Financing”

A construction draw financing program through a bank or institutional lender will likely have very similar eligibility requirements to what we are about to go over.

First of all, there is the eligible purposes for construction financing in the first place. More specifically, in order to qualify for a bank construction loan or mortgage, you need to be doing one of the following:

• Purchasing a new home from a residential home builder.
• Purchasing a new home from a contractor (you own the land and have someone else build the home).
• Perform a self build (you own the land and serve as general contractor and hire licensed trades to complete the necessary work)
• Perform renovations to your existing home to a certain value (will vary with each institution).

If you have a use that qualifies, the next hurdle to get over is eligible property.  Most construction draw financing programs for single or multiple family units (no more than two units) requires that the borrower is an owner of the property and is occupying one unit.  This could include a residential home builder or a self build situation.  Properties that do not qualify are condos and any type of leased land.  Again, depending on the program, the builder/contractor and property may need to be registered under the New Home Warranty Plan.

The land where the building will take place must be a fully serviced lot or the cost to get it fully serviced are included in the construction budget being financed.

On a non insured basis, the construction loan cannot go beyond 80% of the appraised value or the cost of construction plus land, whichever is lower.

On a mortgage insurance basis, 95% of the appraised value of cost or cost of construction (once again, whichever is less) can potentially be financed.

These are the basic eligibility requirements that you first have to cover off before even considering applying for a construction draw financing mortgage.  The best approach to understand which of the available programs best fits your requirements is to work with an experienced construction mortgage broker with a track record of placing these types of construction loans.

If you require construction draw financing, please give me a call so I can review your planned requirements and discuss different construction mortgage programs with you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh