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Will I be able to use construction financing to build a barnlike structure with living quarters?” This is a question that came up this past week. New construction financing and construction renovation financing do have their limits. This week I would like to discuss what works, and what does not work, for residential new construction and construction renovation financing.

Our program works for conforming residential properties. These are generally owner occupied, but we do have clients who build or renovate a property that will be retained and rented. We look at the highest and best use for the property, which needs to be residential in nature even if it is outside of a metro area in a more rural setting. When the appraisal is done on the new build or renovation project, the appraiser will look for comparable properties around the area. The property needs to be compatible, or common, for the surrounding area or market in which it is located.  So, if someone is looking to buy acreage and wants to build a new home, that is great! If that new home will be a barnlike structure with horses on the main level and living quarters on the second floor, that will be outside the scope of our conforming loan products. 

I have had other interesting discussions with clients who want to be their own general contractor, which is also outside of the scope of our program. Not just everyone is qualified to do this – we require a licensed contractor or firm to be in charge of the project. Experience matters when it comes to managing the construction project, project costs, and subcontractors who provide material and labor to the project. Our goal is to get to the finish line without surprises or cost overruns which the client cannot afford.

I have also had inquiries about companies that do panelized construction. Most generally these come from outside the metro area where building options are more limited. These projects can be acceptable as long as there is a general contractor in charge of the project, the company providing the material is credible, the product being built does not meet any market resistance, and the company understands the draw process we have set up with our product.

New Construction and construction renovation financing options are not one size fits all. Clients bring their ideas and beliefs about the process to me every day. My job is to help guide them to a successful outcome – the project needs to work for the client, and conform to the market. At the end of the day, by working together we can find the best way to reach that goal.    – Randy Cullen, NMLS #326128

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