Financing your dream home
Eco Homes’ dedicated team helps with sourcing, understanding, and setting up your Eco home financing. Your Eco home can be financed through a construction loan, which will convert into a traditional home loan (mortgage) once construction is complete. Some of our lending partners can finance not only these construction costs, but also the land purchase.
How Construction Financing Works
Most people understand how traditional mortgages work: homes are acquired through a combination of the buyer’s cash contribution and the lender’s contribution, or “mortgage”.
Construction loans are related to traditional mortgages, but distributed differently. As opposed to issuing the entirety of debt at once, construction lenders issue debt in parallel with certain progress milestones. Additionally, construction loans are typically distributed after all the borrower’s cash equity (closed on escrow at construction loan closing) is used by initial progress payments.
THE CONSTRUCTION-TO-PERMANENT LOAN
When financing your Eco home, your project will be considered new construction and will require what is commonly called a one-close construction to permanent (C-P) loan.
During the construction phase, the debt is distributed in disbursements, or “draws,” as work on the project is completed. The borrower makes monthly interest-only payments during this phase. Once construction is complete, the loan converts to a traditional home loan (mortgage), identical to what one would utilize in financing acquisition of an existing home. Eco’s experienced professionals help you in this process, to make sure everything is as clear and simple as possible.
THE ECO ADVANTAGE
One great advantage to working with EH is our shorter construction timeline, which means that EH clients pay dramatically less interest during the construction period. The shorter building time frame also reduces risk for banks – making financing simpler and more streamlined, for everyone.
Appropriately Sizing Your Budget
Determining a viable project budget can be a complex analysis for first-time home buyers, let alone first-time builders dealing with land acquisition and construction.
The fundamental determinant of how much debt a lender is willing to provide, for construction as for an existing home purchase, is Loan-to-Value (LTV). LTV is the proportion of the lower of total project cost or appraised value that the lender is willing to finance through debt.
EH’s design team helps with the financing process by starting your project design with a recommended base design, aiming to optimize for appraisal. Many clients then opt to customize or add on premium options like expansive decks, pools, or luxurious finishes. In addition, local governments may require additional specifications for safety or local code, which apply to all new construction. Depending on your geography and options, these options may or may not appraise at full cost, while they often do add functionality, safety, and wonderful lifestyle features. In your project design process, EH’s experienced team seeks to be thoughtful about cost while helping you make tradeoffs on appraisal vs value for your specific lifestyle.
Eco Finance Partners
While Eco Homes does not provide in-house project financing, we have established a network of lending partners throughout the country who are ready to finance qualified projects. Starting with the Site Analysis, Eco will assist clients with loan qualification and will work with you and your lender throughout the construction process.
PROJECT FINANCE GUIDE
As part of the Site Analysis package, you will receive a Project Finance Guide, which will provide deeper discussion of key finance terminology and concepts. Additionally, we will review our “Project Finance Toolkit” with you, providing a re-examination of key finance requirements as updated by the Site Analysis preliminary estimate.
Once project design and cost has been established by the Site Analysis, our team will facilitate introductions to 1-3 appropriate lenders, including delivery of project detail and supporting documentation.
It is common for Eco clients to bring pre-existing banking relationships to their projects. In these cases, the Project Finance team will work with the new lender to get them familiar with Eco’s product and process, to vet Eco as a builder and will help negotiate appropriate terms and conditions.
APPRAISAL AND LOAN CLOSING
Eco’s team will accompany the design process and assure that key milestones in the project finance process are moving in line with project process.
Our team will work to ensure that the appraisal is ordered in a timely fashion, assemble a full appraisal package to be delivered to the appraiser, and assist in any appraisal questions if necessary.
Eco’s team will ensure that all necessary Eco materials are delivered to the lender in as rapid a manner as possible so as to ensure financing closes on time.
Financing your dream home