Securing a single family construction loan can be complex, but with the right financial partner, it can be a smooth process. Our recent closing of a $7,254,450 construction loan in Princeton, TX, provides a prime example of a successful project. This financing is being used to build 12 twin home starts and to acquire 60 additional lots, showcasing the versatility of these loans.
Understanding Key Construction Loan Terms
When discussing single family construction loans, it’s important to understand the terminology. Two crucial metrics in our recent loan were the LTV and LTC.
- Loan-to-Value (LTV): This is the ratio of the loan amount to the appraised value of the property upon completion. Our loan represents a 73% LTV, meaning the loan covers 73% of the projected market value of the finished homes. A lower LTV indicates less risk for the lender.
- Loan-to-Cost (LTC): This ratio compares the loan amount to the total cost of the project. At an 84% LTC, our loan covers 84% of all expenses, including land acquisition and construction. A higher LTC can be beneficial for developers as it means they need to contribute less of their own capital.
Why Single Family Construction Loans are a Smart Investment
Single family construction loans are essential for developers and builders looking to expand their portfolio. They provide the necessary capital to cover various costs, including:
- Land acquisition: As seen in our Princeton deal, these loans can fund the purchase of new lots.
- Vertical construction: The funds are used to “go vertical,” covering everything from foundation to the final touches.
- Infrastructure development: Some loans can also cover the cost of roads, utilities, and other necessary infrastructure.
This type of financing allows for greater control over the development process, from selecting the location to choosing the final finishes, making it an ideal option for those looking to build quality homes.
About Us:
Nelson Funding is a nationwide commercial loan broker and direct lender helping borrowers get the best possible financing for their respective projects. Nelson Funding has provided financing for over 80 projects and placed more than $600mm of capital. Nelson Funding has the experience to get almost any project funded: from new construction to cash-out refinances, land development, and more. Nelson Funding specializes in construction funding, bridge funding, and conventional term financing products.
Nelson Funding remains committed to helping our clients secure the best financing for their respective commercial real estate projects despite a rising interest rate environment and tightening lending standards. With Nelson Funding’s capital market relationships and highly experienced team we are still placing high leverage debt for all deal types including land development, single family construction, multifamily construction, industrial, office, retail, hospitality, special-use, cannabis and more.
