Construction To Perm Financing

To Paraphrase Montgomery Gentry of Country Music fame, CPs are

Gone like a freight-train, gone like yesterday
Gone like a soldier in the civil war, bang bang
Gone like a '59 Cadillac
Like all the good things that ain't never coming back
They're gone (gone) gone (gone) gone (gone) gone, gone

Well, they aren't completely gone . . . there are two lenders in the country who will do them.  Two!

The reasons aren't that complicated, the problem with doing a construction loan in a declining market is that when you get to the end of the construction period, your value may have decreased.

A year or two ago, you could have counted on appreciation, or at least seeing the project to completion having maintained value. With Fannie, Freddie and every lender left standing declaring various levels of decline in market value, and with the added expectation that it will continue for the unforeseeable future, no-one wants to risk a six month or one year project with no idea of where the value will fall when it is finished.

You and the bank could end up with a tremendous shortfall, and if you don't have the money to close, the bank has now built itself a spec house. Since most of them are practically real estate companies now, selling their foreclosures, they aren't going to go out and create a loan that has every indicator of going south.

So, postpone that dream house for a while, and look at all the new construction that is out there - and deeply discounted. It is a great time to buy a house, prices are depressed and interest rates are very low. It just isn't a good time to build a house.

I wish you the best in all you do.