Finding difficulty to get construction loan

7 Replies


    I am finding difficult to get a construction loan, My idea to get construction loan is to buy the lot and built the home, I am first time home buyer. I got approved conventional loan but my bank says BIG NO NO for construction loan. 

If you know any private lenders for construction loan or FHA loan lender in Houston, Texas reply me.

 I spoke with three loan lender took all my information still waiting for there reply to get a loan.

Let me know if any one can help me buying or building the home with a FHA loan or construction loan in Houston area.



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Hi Arun,

Getting construction is not a easy task unless you have 25% to 30% down payment.

Have you already found the general contractor & land? 

If the answer is yes, I can help you. I can get you money from investor to buy land and built the house & when its built you can buy from investor using regular mortgage. It will cost you about 15% to 20% of project cost as interest to investor

@Arun Kumar  have you ever built a new home? What is your experience. Banks want sure deals, not wannabes. If you have experience, hit up local banks that know the housing market in your area

From the post above, I think johny has never got a construction loan with a bank. If he had, he would never use a private investor and pay 15-20%. And no down payment is required for a construction loan, you do have to own the lot. 

@Arun Kumar 

There are some lenders that offer Acquisition/Construction Financing but they will want you to have some equity already in the project generally 20% to 30%, and it also depends on your experience as a owner/builder. In that past we have built our custom homes with no money down, but that was because we owned the property out right, so the equity was already there.

@Arun Kumar  

 The issue we are running into with A&D loans is that you need to find a bank that does not have a large portion of their loan portfolio in energy. Allegiance bank does not and we just got an A&D loan approved for a 31 unit town home development in Spring Branch. Everyone else's post are correct in that you will need a minimum of 30% equity to do a acquisition and construction loan. Finally, at the first o this year a law went into effect mandating banks to set aside a 100% reserve on any construction loans that they approve in a non-interest bearing account. So banks have become very picky about the construction loans they approve and are requiring more equity to off set the reserves they have to set aside. My suggestion would be to find a builder that you like and trust and have them buy the land and build the house and you purchase it from them. It will cost you more but you will get the house you want. run a cost analysis between doing it that way and using an investor like the one Arlan suggested. Although, that percentage is very high.


Ronnie Young 

Don't be discouraged.  Shop around.  

Construction loans are generally in the domain of the small regional lender.  Don't waste your time dealing with the big banks.  I would try attending a small RE club in Houston and ask around for folks doing construction loans.  In the Austin area there are about 10 lenders that do these types of loans regularly.  There are others that do them, but those 10 or so really specialize more in construction loans.  

A lot also depends on your loan scenario.  Hiring an experienced GC will probably help your cause a great deal as will having plenty of cash to put down and to provide adequate liquidity post-close.  80% LTC is pretty typical right now with rates in the 5 - 7% range with 1 point origination.  You'll also need plans, specs, and costs to build for underwriting and for as-built appraisals.  

any investors in the Orlando, FL area? I have a client that owns a lot where he will like to built a house to sell once is done or before. He has the blue prints, no submitted to county as of yet. He has excellent credit, but lender will not finance him unless he intend to reside this house as his primary home.  He has a GC to built this property. Please advise. Thanks

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