How to Get a Construction Loan for a Steel Building

okay so this video today is sort of an update but also a how to get a construction loan for a steel building um that you plan on living in um so one of the problems that i've come across with most of the banks that i called um was that they don't want to touch real estate if you don't already own the land they don't want to loan to you and that's more specifically for agricultural companies because they are the ones that typically they don't have a problem with um steel framed buildings because they help people get financing to put up barns and things like that so first of all um what i did to get a construction loan is at all parts of this process kind of require a good old bit of elbow grease um you know i had to call you know pick up the phone i know a lot of people don't like to do that call dozens of contractors and um the steel building manufacturers and all of that and look up layouts though that part's fun um so what i did for the banks was i did a google search of banks um in the area where i wanted to build so we're building in windsor new york and binghamton new york is the nearest like big town and it's like 20 minutes away so i used binghamton because there would be more there than in windsor um and the google search when you go to the map view it just kind of gives you a list actually i don't even know if i need it to go to the map view but anyway it gave me a list of all the banks so i wrote down all of the banks and their phone numbers and i didn't do this step because i find it quicker to make a phone call but for those of you that are hesitant to do a phone call you can go to their website first and see which ones do construction loans for me it takes just as much time to poke around on their website as it does to talk to someone and say do you do construction loans let's assume you don't want to call them first look on their websites and see the ones that like you go usually to like personal banking um mortgages and then somewhere in there they'll list their loan types and it may say new construction or construction loan something like that if it lists that they do construction loans um so write down on your little list of all the banks which ones do construction loans call those first because you know that they're gonna do it when you call them the main bank number is not going to be answered by a mortgage specialist it's going to be answered by just a teller and um they typically i have found if you say do you guys do construction loans they'll be like um i don't know so the ones that you already know do construction loans when the teller picks up the phone say can i speak to your mortgage specialist or loan originator whatever mortgage specialist they'll know what you mean um so once you say that you uh they'll or they might they'll either transfer you or they'll give you that person's name and number um alternatively they may ask for your email and phone numbers to have that person call you i would always rather call them because you know i do sales too i don't always get around to calling people in a timely manner but i always answer my phone so calling them is usually quicker um okay so then uh when you talk to the mortgage specialist what you want to ask is what percent down they require for us we couldn't afford 20 down which even before covid was typical but since covid a lot of banks because of the what was it called the cares act they actually lost a lot of money and some banks had to close because people had these construction loans outstanding and the um whatever the act was that said hey if you're struggling during covid you don't have to make your mortgage payments mortgages had to eat a lot of costs especially during construction where they have to you know pay the contractors um so anyway um ask the percentage down the goal of this for us at least was try to find one that was less than 20 because we with our previous bank we'd only needed five percent down but when we told them it would be a steel building they hyped it up to 20 and we decided we were like we can't do that um so ask them the percent down and ask them what rate they charge this won't be a deal breaker honestly you're going to end up going with whoever will work with you and your steel building but if there are two go with the one with the lower rate so ask for that and um if for whatever reason they don't do construction loans anymore ask them if they know who is um they have no reason to hide that from you because they're not losing business you need a construction loan um and i've found that banks actually multiple banks referred me to the one bank that i think we're going to end up using and so just to show you what that elbow grease looks like this is my list of all the banks that i called and my notes about if i left a voicemail or what they said or if they do loans or not um and especially if you're building a steel building i did call a couple of agricultural lenders as well um who like i said they did not require or they were they were totally fine with steel buildings but i found that they required 20 down or more um so that was not very helpful we also i did reach out to the fsa which i in our previous video we were writing a business plan for because they had these like down payment assistance loans that were available and i don't know if the gentleman that i spoke to really knew what he was saying he seemed like he was a newer employee but um he said for the new farmer loans you need to have three years of farming experience farm management experience and i was like um for a new farmer loan and he said that there is more um wiggle room if you are not if i already owned the land but because a construction loan we want to purchase the land and build the house at the same time um they just don't want to touch real estate i guess so that's where that was um but conventional banks um they were okay with lending for this so the way that i phrased it when i was talking about a steel building you don't really you want to be honest because you'd hate to go down the line and then have them say whoa whoa whoa this has steel in it 20 down right now um so what i've been saying um when they ask like and what type of home is it or what are you going to build is it modular whatever um is i've been saying it's stick built because it is all the parts are delivered there and it's going to be erected there um but the the outer frame is made with steel because that's true it just they put up the shell the steel shell and then the inside is still framed with you know wood insulation dry while all the same um and then sometimes i gauge your audience but sometimes i add like yeah it just seemed like a superior building material not to mention like you know because it's it's rot proof it's you know termite and pest proof nothing's gonna burrow into it it's fireproof so it just seemed like a good choice and the lenders that i said that to were like oh yeah i don't think that'll be a problem so at least you've been upfront about it sorry about that um so anyway we did all that work the banks that we i ended up finding um three actually that we would be able to work with one of them one one of the let's see i i probably left messages for 24 banks or you know called them left messages whatever spoke to about 10 and of those one was offering conventional mortgages um little background conventional versus fha can um if you are buying a house or building a house and you can't afford to put 20 down you will have to pay something called pmi private mortgage insurance and um with an fha loan you pay that forever until you unless you refinance to a different loan with a conventional loan the um the pmi payment will automatically drop off once you hit 20 percent equity or thereabouts some loans are a little bit different but anyway it goes away by itself you don't have to refinance the disadvantage of refinancing is you have to repay closing costs which can be thousands of dollars so a little background there um so i found one bank that would offer a conventional construction loan with five percent down which is kind of unheard of that's like the only one that i found um and they were okay with the idea of the steel building but they did say we only work with approved vendors um and so they said to since we haven't worked with worldwide steel buildings who's the company our our steel manufacturer excuse me then you will need to have them fill out a w-9 and a builder's resume now worldwide steel buildings is not a builder they're just basically like when you build a house a regular house you get your wood from a lumber mill they are basically the lumber mill they're the steel mill they cut the pieces to size and you know ship the steel to my site for someone else to put up um they're a great company to work with by the way when i told them i need a builder's resume they were like but we're not a builder they could have just said this doesn't apply to me i'm not doing this but instead they said we'll put together a company profile that i think will meet that underwriter's needs which super helpful thank you worldwide steel so anyway there is there are additional hoops i need to jump through to get that and they still need to be approved by that bank's underwriter but um that's an option we found another one um that was offering 10 percent down which was like kind of the top of what we could afford but we could do it um 10 down and um a higher interest rate um so that's that's a good backup and he also said like i haven't heard of the steel building thing but i don't think it'll be a problem um and our third backup was someone or actually maybe this is our whatever second third backup whatever we found another bank who would do an fha loan construction loan with five percent down um but again the disadvantage of that is you keep the pmi on there um i'm looking at my my notes from my bankers and he also said he doesn't think steel is a problem but um he did say that with fha loans they have some special rules for example if you are purchasing from a family member a house if you're purchasing a house from a family member they charge more like they require a higher down payment and he said it's stupid it doesn't make sense but i let me make sure that that's not the case for land because for those of you that recall um chad and i are purchasing we are subdividing the land land that my parents own and we're buying our half from them so he said let me make sure that that's not the case for land with fha as well um so we found a couple of backups and as like a fourth place last resort we know that the agricultural lenders will uh handle steel buildings they don't have a problem with that but since they required that 20 down we had been thinking like oh we'll get a personal loan from bank a to make up the rest of that 20 down payment and i don't know why no one told us this before but um one of the bankers was like unfortunately you can't do that um you can't use debt to pay for debt and i was like okay i kind of get that but that's super dumb that we did qualify for a 360 thousand dollar mortgage but because for this smaller mortgage you require 20 down it just doesn't whatever it just doesn't make sense to me um anyway so if you make all of these calls you call all your banks you find ones that will do construction loans and that aren't immediately scared away by steel buildings um if they show hesitation for steel buildings but you really want to use that bank i would ask them like be prepared to say well what if i provided you a w-9 and a builder's resume or some type of company profile would you be willing to work with that company because what the builder's resume does and what the company profile from worldwide steel buildings is for is to just basically show they are actively doing business they haven't like you know been sitting on their butts for 10 years and aren't up to date on codes and that they're reputable so it asks for like you know bank references and trade references and um you know previous builds and things like that so if if you have a bank you really want to use they have a you know good interest rate only five percent down get get in front of that don't let them like there they are still people and they do still want to make a deal so um ask them hey what if i gave you a w-9 and a builder's resume would you be willing to work with them and they might say maybe or let me ask my underwriter um so no doesn't have to be the last answer but just keep that in mind um so that's that's the end of the how to make your list of banks find out which ones do construction loans call those first ask them their rates and their percent down ask them about steel buildings and word it like a stick built by the way stick built means it's assembled on site versus modular which is assembled far away and they ship the pieces and if they say they're uncomfortable with steel buildings ask if they would accept a w9 and a builder's resume to reconsider um if you are building in upstate new york the new constructions are unfairly taxed um those are actually not my words those were the words of a lender he said i want you to know before you try to build here your taxes are going to be astronomical and i was like great we had already gotten it um gotten a message from an assessor again back in july so that may have changed so for a four bed two and a half bath you know attached two-car garage with a full basement um we were looking at almost eleven thousand dollars a year in taxes so that's every year if we don't have a mortgage we're still paying a thousand dollars almost a thousand dollars a month in taxes so it is superbly expensive um so do make sure you know about the taxes to find that out you can just reach out to the assessor of that town and um tell them the scopes of like the the layout and whatever whatever they need to know about the house you're gonna build the layout num the square feet the number of acres you're on whatever and um ask them to project what your taxes will be and they will they will tell you unfortunately they are not um bound in any way to a number that they email you so if you know they tell you yeah it'll be five thousand dollars and then it ends up being twelve thousand dollars there is nothing you can do so it's a little stupid but um ideally they want people to move to their towns so windsor by the way um windsor new york is the lowest taxes in the municipality so if you are looking to move to upstate new york near the pennsylvania border check out windsor um we could be neighbors so i hope this was helpful um obviously leave a comment if you have additional questions i am happy to help and share the woes of this process with anyone who will listen so yeah good luck

Channel: Stephanie F

Views: 45,143

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Id: ilg0XBk5s30

Length: 15min 47sec (947 seconds)

Published: Fri Feb 19 2021