-
Low Loan Amount-New Construction
Looking for new construction loan with a low lender minimum. Looking to borrow $80 to $90k. It would be an investment property. My FICO is around 660 and want to put 20% down. If that small of loan amount isn’t possible, would like to know the minimum loan amount required.
-
10 Replies
-
Getting a new-construction loan for an investment property between $80,000 and $90,000 can be difficult because many lenders require a minimum loan amount.
While a credit score of 660 and a 20% down payment may meet the basic requirements, lenders also consider factors like the property type, location, appraised value, loan program, and how you plan to use the money.
The main challenge is the smaller loan amount, not your credit score or down payment. Most lenders require at least $100,000 to $150,000, though some may accept less but with tougher conditions.
To help us move forward, could you share the following details?
- State and county in which the property is located
- Purchase price or estimated total project cost
- Property status: completed or under construction
- Property type: single-family, two- to four-unit, condominium, or manufactured home
- Projected rental income
- Credit profile: If your requested amount is below our minimum, we will tell you the lowest loan we can offer. Then we can discuss increasing the loan, exploring other options, or adjusting the terms to better suit your needs.
-
I’m in the information gathering stage. Basically, a builder quoted me a rough estimate of $90k to build a house. It’s a separate parcel behind my current home in Celina, OHIO. I really want to do a one time close construction loan. I like the idea of having a permanent loan in place in case the market falls apart during the process. Gus suggested that I add a basement to increase the loan amount. It would be a single family residence. I think it will be worth $150k when construction is completed. If it helps, I have some small collections that are dragging down my score. Might be able to raise to 700 if I pay those.
-
This reply was modified 3 weeks, 2 days ago by
John.
-
This reply was modified 3 weeks, 2 days ago by
-
New construction loans, also referred to as construction-to-permanent or one-time close loans, enable you to finance the construction of your home and subsequently transition to a standard mortgage upon completion. With a single closing, this structure reduces both costs and exposure to interest rate fluctuations.
If you already own the land, your construction loan usually covers most building costs. Land ownership can serve as collateral and help you secure a down payment.
There Are Several Main Types Of Construction Loans
- The One-Time Close loan, also called Single-Close or Construction-to-Permanent, requires one application and closing, resulting in a single set of fees.
- Funds are released in stages as construction progresses.
- The loan converts to a standard 15- or 30-year mortgage upon completion.
Two-Time Close New Construction Loan
The Two-Time Close option requires an initial construction loan followed by a separate permanent mortgage. While this approach offers more flexibility, it usually results in higher costs and greater exposure to interest rate changes.
A Construction-Only loan is a short-term option, typically lasting 6 to 18 months, and must be repaid or refinanced after project completion.
This option is generally less attractive. For investment properties, lenders require higher down payments (often 20% to 30% or more), increased equity, higher mortgage rates, substantial cash reserves, detailed rental income projections, and stricter credit evaluations. Many lenders do not offer construction loans for investment properties.
United Wholesale Mortgage One-Time Close New Construction Loan
UWM offers One-Time Close New Construction loans for most projects, with 15- or 30-year fixed-rate and high-balance mortgage options for both primary residences and investment properties.
- Key requirements include a minimum FICO score of 620 and the option to borrow up to 95% of the home’s value, depending on your situation.
- The construction phase usually lasts 11 months.
- Loan amounts are capped, with limits expected to reach $832,000 for single-family homes in most regions by 2026.
- Since UWM works through brokers, you must use an approved broker.
- Even with a 660 FICO score, additional conditions may apply for investment properties or smaller loans unless UWM grants an exception.
- All-in-one construction loans are also available for investment properties.
- If you seek a loan between $80,000 and $90,000 through a broker, expect special conditions to apply.
Summary
For an $80,000–$90,000 loan with a 20% down payment and a 660 FICO score, the down payment usually meets lender requirements and may reduce or eliminate private mortgage insurance (PMI). Full land ownership increases equity and strengthens your application. While a 660 FICO score is slightly below the preferred threshold of 680 for many lenders, strong land equity, a low debt-to-income ratio, and a reputable builder may enable approval for an investment property loan with a score between 620 and 660.
Loan Size:
- Most lenders require a minimum construction loan amount of $100,000 to $150,000 due to processing costs and risk.
- Some private or hard-money lenders may accept smaller loans, but these usually come with higher interest rates and fees.
- A loan of $80,000 to $90,000 is considered small, as most lenders require minimums of $100,000 to $150,000.
- Lenders assess the appraised value, which includes both land and construction costs.
- With 20% equity, borrowing $100,000 to $112,000 for the entire project may be feasible.
- Detailed construction plans, permits, and a qualified builder are required.
- Construction loan rates are typically 1–2% higher than standard mortgage rates, with even higher rates for investment properties.
- Given potential rate changes by 2026, securing a fixed rate is advisable.
Other Requirements:
- You must provide detailed construction plans, including a timeline and budget.
- You are required to use a licensed, experienced builder approved by the lender, and a final inspection will be conducted upon completion of the project.
- Stable income and sufficient cash reserves are necessary.
- Most lenders prefer a debt-to-income ratio below 43%, though some may allow slight flexibility.
Steps for Loan:
- Gather all required documentation, such as the land deed or proof of ownership, the builder contract, construction plans, and tax receipts.
- Apply for pre-approval with multiple lenders to compare options.
- Use a broker specializing in construction loans who can access wholesale products unavailable to individual borrowers.
- Select a builder with strong references or positive reviews.
- Establish a contingency fund by allocating an additional 10% to 20% above projected costs.
- This guidance applies to projects in or near Tennessee.
- UWM via a broker
- National banks such as Wells Fargo, Bank of America, PNC (which services TN), Alliant CU
- Local banks and credit unions such as Tennessee Valley FCU, Southeast Bank, and FirstBank all offer construction-focused products right here in Tennessee.
- For investment loans, private or hard-money lenders such as LendingOne typically charge higher interest rates, often from 8% to 12% or more, and offer shorter loan terms.
- Minimum loan amounts usually start at about $70,000.
- Close loans allow a lower down payment (3.5% or more) and more lenient criteria, but are mainly for owner-occupied homes, not investment properties.
- Loans up to 90% Loan-to-Value (LTV):
- Consider working with portfolio lenders or credit unions, as they may offer more flexible financing options.
- You may also explore a home equity loan or a home equity line of credit (HELOC).
- Some borrowers use private financing initially and then refinance into a permanent loan after the project is complete.
- If alternative options are unavailable, you may need to meet the lender’s minimum loan amount requirements to secure project financing.
Recommendation:
Work with a broker who specializes in UWM and construction loans. Search online for “UWM construction loan broker” or consult local experts. Improve your credit score, document rental income and savings, and obtain at least three bids from builders to strengthen your application. Provide detailed information about your project’s location and type.
Stay informed about changing loan requirements and market conditions, and prepare for possible construction delays or builder-related challenges.
These strategies reflect projections for the 2026 market, but each lending scenario is unique. Interest rates, terms, and available options may change, so consult multiple lenders to find the most suitable solution. A mortgage professional can assist with pre-approval and provide guidance throughout the process.
-
Thank you for the information. One question, how do I know if a builder is qualified? Or is it just up to each individual lender?
-
It was great talking with you this afternoon. I’m glad to hear you and your family are doing well. If you don’t mind, let’s discuss potential possibilities and/or options as a case scenario. Exploring a HELOC or second mortgage may be an option which I know it may be short based on a guestimate of $400,000 with a $340,000 first position. A HELOC or second mortgage likely won’t be enough to fund the entire project. Let’s say that your main home is worth $400,000 and has a $340,000 mortgage, so you have $60,000 in equity, which is 15% of the home’s value.
I suggest checking exactly how much you can borrow with a HELOC or second mortgage.
Most lenders let you borrow up to 80% or 85% of your home’s value with a HELOC, so you can only use some of your equity. A few lenders go up to 90% or 95%, but that’s usually for people with great credit, high income, and low debt. For these high-limit HELOCs, you generally need a credit score of at least 700. For example, $400,000 × 90% = a maximum total debt of $360,000.
$360,000 minus your current $340,000 mortgage means you could get about $20,000 from a HELOC or second mortgage.
If you qualify for 95% combined loan-to-value (CLTV),
$400,000 times 95% gives a maximum total debt of $380,000.
$380,000 minus your current $340,000 mortgage leaves $40,000 in available borrowing power. Even with a high 90% or 95% HELOC, you’ll likely get $20,000 to $40,000 before fees. With a 660-credit score, it’s tough to get approved for a 95% loan unless you have a strong relationship with a special lender or credit union. Some, like Navy Federal, offer high-limit HELOCs, but their requirements are strict.
Financing Options
Option 1: HELOC or Second Mortgage for Down Payment Only
This option may be suitable if funds are only needed for:
- Permits
- Plans
- Engineering
- Utility connection
- Down payment toward hard money
- Cash reserves
- For the first builder, a HELOC alone probably won’t be enough for the entire construction project, since there isn’t enough equity.
A ground-up hard money construction loan is often the best way to finance new investment property builds. Hard money lenders look at your project’s size, land value, after-repair value, exit plan, and available cash, not just your credit score. These loans are short-term, backed by the property, and usually last 12 to 24 months. They are often interest-only.
Interest rates are usually between 10% and 13% or higher, depending on risk, your experience, and the market. Most lenders offer 70% to 75% of the after-repair value or 75% to 90% of the total project cost.
Here’s how construction draws work:
- Money is given before scheduled inspections.
- Most lenders require a minimum loan of $100,000 to $150,000, but some private lenders may accept smaller amounts.
For example, current investor loans might have rates of 9% to 13%, lender fees of 1% to 5%, and offer 75% of the after-repair value and loan-to-cost ratios of 85% to 90%. The exact rehab or construction funding depends on the lender and loan terms.
Possible Structure of the Hard Money Loan
If the adjacent lot is a legal parcel, the simplest way to structure the loan would be:
- Secure financing for just the new construction.
- Use the land value and cash as equity.
- Secure a construction loan up to the new construction value.
- After construction is finished and you have a certificate of occupancy and a lease, you can refinance with a DSCR rental loan.
- A hard money lender might offer up to 75% of the after-repair value, capped at $120,000.
- You’ll likely need to put in some of your own money before the lender releases construction funds.
You may also need upfront cash for down payments.
- Plans
- Permit Fees
- Closing Costs
- Interest Reserve
- Contingency Reserve
- Builder Deposit
- Insurance
- Reserve for Appraisal and Inspection Fees
Another important thing to consider:
This is a good sign. The project is moving forward and could lead to more development in the future. Since the unit is on a separate parcel, it can be treated as its own investment property.
If it’s on the same parcel as your main home, a different lender would consider it an ADU, following their guidelines.
That affects:
- Permits
- Zoning
- Collaterals
- Financing
- Yield
- Refinancing
With an 85% loan-to-value on your main home, a HELOC would likely give you only $20,000 to $40,000. And with a 660-credit score, approval isn’t certain. Instead, you could use a small HELOC or second mortgage to build your cash reserves, then get a hard-money construction loan. After the project is finished, refinancing with a DSCR rental loan is a good option.
Lenders will want these details:
- Complete property address with state
- Is the site for the new house on a different parcel?
- Estimated costs for the build
- Estimated end value of the build
- Builder contract
- Amount of cash remaining for the close
- Current status of permits and zoning
- Exit strategy: Anytime between rent, sell, or refinance
- Anticipated rental income after the project is complete.
For borrowers in a similar situation, the best approach is often to use a HELOC for down payments or reserves if possible, and rely on a hard money or local construction lender for the main project financing.
-
Thank you for your reply. I doubted the Forum but it actually works. A HELOC wont work in my case. I need to keep that financing option available in case my HVAC breaks in the main house. It’s 6,500 square feet and going too expensive to replace.
It’s my understanding hard money loans are short term financing. Don’t they have to be refinanced after like 18 months? I’m worried the market will change mid-project and I will be stuck with high rate or no loan will be available.
I like the one time close construction loan and like your idea of adding a basement if I have to get a higher loan amount.
-
From my understanding, the builder had to built a few houses and/or done major renovation projects in the past three years. You cannot be a builder who built homes 20 years ago and are just opening shop
Every lender has their own requirements of home builders.
-
UWM does the One-Time Close Construction
I will ask my wholesale rep on the minimum loan amount and investment property. I know they do a 5% down payment One-time Close Construction loans for primary homes.
-
One of my MLO buddies just finished a One-time Close New Construction loan and build with United WHOLESALE Mortgage (UWM)
https://www.uwm.com/trending/one-time-close-new-construction
uwm.com
Smoother process, expanded eligibility | Trending Now | UWM.com
Smoother process, expanded eligibility | Trending Now | UWM.com
-
I think its the best way to go with UWM ONE-TIME CLOSE New Construction Loan. I think the minimum loan size may be $250,000. I can double check with my rep in the morning. Gustan told me UWM can make exceptions as other lemders do.
https://www.uwm.com/real-estate-agent
Log in to reply.