Financing should be your first step in the construction process. Borrowers must understand how much home they can afford before they can begin looking at plans, land and construction costs. Through a quick consultation with a construction loan specialist, borrowers will know exactly how much they can spend on their project.

• A loan application and/or a personal financial statement which would include the amount of the requested construction loan
• Three years of tax returns for both the Borrowing entity and any guarantors
• Plans and specifications for the construction project in sufficient detail for the appraiser
• Detailed budget of the construction costs, both soft and hard costs
• If the Borrowing entity is a corporation, LLC or other business entity, then appropriate business documents

Most construction loans require a contingency reserve. Contingency reserves are funds set aside in case of overruns. Typically 5 to 10 percent of the construction cost is set aside, in addition to the construction budget, to help borrowers in case of overruns. If a contingency reserve is not established at loan inception, then any cost overruns or changes to the construction contract must be paid by the Borrower.

If there is sufficient Borrower equity in the project, an interest reserve may be established at loan inception for payment of interest on the construction loan. If an interest reserve is not established at loan inception, then the monthly interest on the construction loan must be paid by the Borrower.

While interest rates and fees will play a determining factor in a borrower's decision for a construction loan, the borrower also should place equal emphasis on the loan features offered. The best deal is one where the borrower can accomplish all of their objectives. When working with the construction lender at Bank of Jackson Hole, a borrower has the ability to tailor a program to meet cash flow, interest rate, and project goals. Working with the construction loan expert at the Bank of Jackson Hole will make all the difference in how smoothly the transaction is executed and will educate the borrower on the process so there are no hidden surprises after the loan closes.

Yes. The borrower must provide receipts and canceled checks to show that funds were used for the project. These monies can be used towards cash to close. Permits, plans and material deposits/purchases prior to close all fall into this category.

Yes. Existing land equity can be used. Determining equity is done in two ways. Depending on how long the borrower has owned the property, either the purchase price or market value will be used to determine equity. If the borrower bought a piece of land for $40,000 one year ago and today owes $20,000 for the land, the equity is $20,000. This holds true even if the market value of the property is $60,000 today, because of seasoning. Market values can be used to calculate equity if the borrower has owned the property, for or more than, two years. Land comps will be needed to justify both market value and purchase price.

There is no uniform answer to this question since cash to close is determined by many factors. Loan size, existing equity, loan to value and builder type all determine cash to close. Closing costs include, but are not limited to, a loan fee, appraisal fee, site inspection fee, title insurance fee and other fees, depending upon the type of property. A construction loan expert at Bank of Jackson Hole can tell you exactly how much you'll need to bring to close.

Programs are available for leasehold properties with lease terms that exceed 30 years.

The answer to this question depends on what stage the customer is in the construction process. If a customer has plans finalized, cost breakdown completed and general contractor selected, approval of the construction loan can be obtained within a few weeks, subject to satisfactory receipt and review of information such as the appraisal and title insurance commitment. Closing will largely depend upon receipt of the appraisal and title insurance commitment.

Funds are dispersed through draw requests. Prior to closing, borrowers will submit a cost breakdown, which details the itemized costs to complete their home. Depending on the loan draw schedule, borrowers may have five draws or an unlimited number of draws for their project. In a typical scenario, the borrower or builder will request a draw after work has been completed on the project. The lender will then schedule an inspection by a third party to verify work has been completed. Once work has been verified, the lender will then wire money to either the borrower or builder depending on how the borrower would like to handle funds. This process usually takes three days to complete.