apply same construction loan with different banks?

Question

1.  I heard that it is a good idea to apply the same loan with different banks in order to see which bank offers the most suitable loan for an individual, because lenders do not give details or enough info upfront before one applies a loan.  Can an applicant really do that?  If so, what are the cons of applying a loan with different banks?

2. Every house related loan requires an appraiser to ensure the value of the property not below what's pay for.  I understand why banks do it, and it does not conflict much with pre-existing homes.  However, for a brand new construction that one hires a builder to build the home almost always much more expensive than the preexisting homes.  That means, in today's market, that the appraised value of the house-to-build and the property would be much lower than what the construction costs.  In this case, it is impossible to get a construction loan now, am I right?

Landlord · Accepted Answer

It is possible to get one.    It is the same as always, you must pay at least 25% of the cost of building up front to the bank.     You are only borrowing 75%.    And of course you are risking the land, which you own free and clear.

At the end of construction the house only needs to appraise for 75% of the cost to build it in order to convert.

Depending on your market the lending bank may require you to invest closer to 50% of the costs.

Steve D · Answer

1) The only real con is that some banks will charge an application fee for the application.  Just make sure that your applications are all within a short period of time so they are counted as one.

2)  An appraiser bases the appraisal on market value.  Construction costs should be lower than the price of selling the house (otherwise, how would builders make a profit).  Of course, you will have to come up with 25% to 30% of the construction cost as a down payment.

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apply same construction loan with different banks?

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