• Alex Press

Partial Funding of Construction Loans - FHA and VA Commune With Banks

The partial funding of construction loans is very rare and almost never seen in history. The primary reason is due to the loss of lenders during the financial crisis, which took place in 2008. All banks require borrowers to fund at least 10% of the cost, which would include the holding deposits and draw down from home equity lines of credit. This means that a borrower who wants to borrow $200,000 would require deposits of $20,000 and a line of credit on the property equal to 10%.

Banks and lenders are reluctant to lend more than 90% of the purchase price, however, Partial funding allows construction to proceed while the bank secures the remaining funds. There have even been instances of construction loans reaching 100% of the price, often immediately after the main developer has completed the necessary due diligence and has filed title and closing of the project. In such cases, once the full deposit has been provided, the bank will begin to advance whatever additional funds are necessary to pay off