Land or lot servicing financing is typically available to developments once they have gotten to plan approval stage with the local planning authority.
There are a number of keys to locating and securing a site development loan.
One of the first criteria of a lender providing land servicing loans is the track record and reputation of the developer in terms of their professional resume and list of successful projects completed. A lack of historical success can greatly reduce the amount of leverage that can be available for any given project.
Directly connected to the first criteria is the financial track record of the developer as well. Its not uncommon that lenders will not consider an application from a developer who has had one or more bankruptcies in the past from failed projects. The distinction here is there is a big difference between a project that was not all that successful and one where those providing financing lost money.
Next on many lenders’ criteria list is the number of presales that have been completed to the point of application and projected to be completed at the point that funds are required. The presales form the foundation of the exit strategy for land servicing loan repayment so the amount and strength of the agreements is going to be important for financing.
Lenders are also going to be interested in who the project engineers are and level of work that has been completed to the point of application. Just like other third party service providers such as appraisers, lawyers, and accountants, lenders can also have a list of approved project engineers that are comfortable with as well as a list of project engineers they won’t work with.
The last, but hardly least area of initial focus by a lender providing land servicing mortgages is the location of the development and the projected absorption rate of the lots that come available from the development work to be performed. The lender is going to be interested in the amount of inventory that exists in that local market, historical proof of annual absorption, and the amount of market share the development is expecting to have versus other developments in the area.
Proactively putting all this information together with a construction mortgage broker can go a long ways to not only locating the financing you’re looking for, but getting the funding in place by the time its required.