We are looking for answers

Here at Seattle Backyard Backyard Cottages we are always thinking of new idea’s to help homeowners realize their dreams.  I have recently been contacting banks and going right to the desk and asking,

“When are you going to start lending, and HOW do my clients get financing for their next project?”

My goal is to put clients and banks across the table and not have blank looks come across when we mention Backyard Cottages.  The Cottage is not new but it is a new enough building type that it should have some unique lending opportunity’s.  I have been pounding the pavement and running my iPhone dead trying to find the right way to do this for my clients.  Recently I spoke to Sandy Japhet of Olympic Lending Solutions and she has these idea’s about finding financing.

Do you have questions on financing your backyard Cottage? Below are a few options and items to consider when planning your construction project. Here are a few scenarios; YOU CAN…

1. Pay everything out of pocket if you have the funds available.

2. Take out a home equity loan if you have sufficient value in your home, own it free and clear or have a small mortgage lien that would allow you to obtain a line of credit to complete your project.

3. Or, if you are like the majority of homeowners, you will need a construction loan. The construction loan is based off the finished value of the property if you have owned the property for a year or more. The lender will require an appraisal based on plans and specs to arrive at the value of your finished project. The construction loan can be 90% of this appraised value. The value is determined by the current market value of the home, the cost of construction by the builder, plans, specs , cost breakdown, materials, permits and design. This is your feasibility study. Once the feasibility and your credit package is approved by the bank, you can sign and close for your construction financing.

The new loan will pay off any current mortgage or liens against the property and include the cost of your project up to 90% loan to value.

You will make draws against the remaining balance that was set aside for construction. An inspector from the bank will visit the property to approve the draw request, making sure the amount requested equals the work completed or materials delivered to the site. This process protects you, the builder and the lender. During the course of construction, this step may take place several times until the project is completed. When the project is finalized and approved to occupy, your construction loan will modify to a permanent mortgage. Typically a 30 year fixed mortgage.  During construction, you make interest only payments based on the amount drawn from the loan. Construction loans are very detailed; however, they do provide checks and balances for your project. The qualifications for a construction loan are similar to a conventional mortgage; the underwriter will look at your income, debt and assets, as well as the feasibility of your project. Contact me regarding more information and to get prequalified for your project. At Olympic Lending Solutions, we strive to make your transaction as smooth as possible and we are there for you at every step of the process. We want to be a valuable resource and help you achieve your dreams.