NEW CONSTRUCTION

For those considering new construction, consider an FHA-insured construction loan. They offer high loan-to-cost ratios, fixed interest rates for the construction period, and one seamless loan for the construction period and the next 40 years. While this structure does not suit every financing situation, it remains the most cost-effective (lowest interest cost) alternative to achieve a long-term, fixed interest rate, non-recourse construction financing.

Using FHA mortgage insurance may also produce a higher loan-to-cost ratio meaning a potential reduction in the equity requirement relative to other alternatives. It should be noted that utilizing this structure may take more time to close due to the involvement of FHA in the evaluation and review of certain elements of the loan underwriting. Further, the use of Davis-Bacon prevailing wage labor rates is required and may affect the labor component of the project costs. Despite the underwriting and processing distinctions of an FHA insured loan, the outcome can be very favorable. Which is why we believe this alternative should be carefully evaluated and considered.

Preliminary Information Requirements
Please provide the following for a preliminary loan analysis:
 

1. Preliminary construction cost breakdown (detailed)
2. Preliminary site and floor plans
3. Financial Projections including projected income statement and balance sheet
4. Description of current development status (entitlements, zoning, land procurement, etc.)
5. Copy of any internal market study that was done to prove need and feasibility

Term Sheets 

• NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION FOR-PROFIT 
• NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION NOT-FOR-PROFIT 
• SECTION 242 

For more information about Ziegler’s FHA/HUD services, please contact one of our experienced team members.