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Construction Take Out Loan

What is a Construction Take-Out Loan?

California Mortgage Advisors Inc. has been helping clients with Construction Take-Out loans for over 20 years. At CMA, we are dedicated to doing what is best for our clients as quickly and efficiently as possible. A Construction Take-Out loan is one of the more difficult loans to obtain, however our trained Mortgage Advisors are here to guide you through the process. Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to apply online.

house11A Construction Take-Out Loan is a loan that replaces a construction loan with a more traditional long-term mortgage. A construction loan is a loan designed to take a property owner from the planning stages of a real estate project to the finished product. They are, by their very nature, designed to be short term financing. As such, the lender is concerned with a very specific set of criteria when deciding whether to approve a construction loan application. They want to know that the size of the requested loan is appropriate to the cost of construction and that the construction itself is being done by a certified contractor with a detailed timetable for project completion. Typical construction loans are for 12-18 months.

A construction take-out loan, on the other hand, is not only focused on the borrower’s long-term ability to repay the loan, but it is also replacing a very specific type of loan. Basically, the lender’s main focus in the case of the take-out loan is making sure that everything between the start of construction and the completion of the project happened went according to plan and that the money went exactly where it was supposed to.

Paper Trail

At CMA, this is a straightforward process. Our Mortgage Advisors will review the construction loan building plans, draw schedule, change orders, and final invoice to ensure everything progressed in an acceptable manner. In the event that a portion of the project was financed with cash, the Mortgage Advisor will also require copies of banking records and receipts to source funds from the borrower to the construction cost. Many potential applicants find it beneficial to create a bank account specifically for the construction funds to pass through when they apply for the initial construction loan.

Certificate of Occupancy

As it’s named would imply, a certificate of occupancy is a document issued by the local building or zoning agency indicating that a particular location is currently suitable for occupancy. In this case, suitable indicates that the building currently meets all applicable laws and zoning regulations pertaining to occupancy. Before any construction take-out loan can be approved, CMA requires a copy of the properties certificate of occupancy.

The application process, timeframe for completion and associated costs for a certificate of occupancy vary widely from location to location. However, the inspection process for obtaining a certificate of occupancy is universally rigorous.

Lien Check

Before any construction take-out loan can be approved, the property will have to pass a construction lien check conducted by CMA. A construction lien is a legal claim made by one person on the property of another to secure payment for services rendered. If a contractor is not paid for services performed on a property, they are legally permitted to place a lien on that property until the debt has been resolved. However, a construction lien may also be placed on a property by a subcontractor. When taking out a construction loan, it is important to maintain detailed records of contractor payments and work activity in order to prevent potential fraudulent liens.

At California Mortgage Advisors Inc., we genuinely believe that we offer our customers the best mortgages in the industry. We have offered a variety of loans since 1993, which means our Mortgage Advisors have successfully matched tens of thousands of borrowers with loans tailored to meet their needs and unique financial situations. Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to apply online.