Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
One need not look further than the ancient text of “Ethics Of The Fathers” (Pirkei Avot) to learn the secret of real estate that industry experts have been touting for years. “Location, Location, Location” is often referenced as the most significant consideration when purchasing a home. I have concluded that is what our scholars were referring to when they said, “Who is rich? One who is satisfied with his lot.”
In fact, so many seem “satisfied with their lot” and apparently their location, that new construction and renovations are at historic levels. It’s hard to drive a few blocks anywhere without seeing construction dumpsters and crews working on all types of makeovers, whether they be “ground-up” (knock-downs) or internal renovations or external extensions.
The good news is, the process of getting the financing for construction has become a lot easier over the past few years than in years past. That’s not to say the process is simple, and indeed not readily available everywhere. In fact, most banks and financial institutions will not consider financing anything that is related to renovation, and/or based on “projected,” or “future” value after construction is completed. Despite the limited options, there are programs and opportunities, available from lenders, such as Approved Funding that can help someone navigate this process.
To be more specific, this means that someone who currently owns a home and wants to explore construction options, or someone who wants to buy a house and custom-build it to their taste and specifications, there are a myriad of options available to help with this process to first time home buyers and existing homeowners alike.
As a start, it is essential to understand the difference between a “one-time-close” and a “construction-only” loan. As the name indicates, on a one-time close, that is where the bank is already determining the “end financing” after the construction phase, and stages are complete. Assuming a 30-year mortgage, as an example, the first 12 months would be a construction loan which would be paid out to the builder or contractor in stages, and would then convert into a standard fully-amortizing loan over the next 29 years post-construction. Alternatively, the construction-only loans would demand that the loan is paid off (i.e., refinanced) after the construction concludes.
In addition to the “types” of loans, the construction “products” themselves have evolved over the years including popular programs that are insured by the government, such as a 203k loan or a Fannie Mae HomeStyle Renovation loan. The details and nuances of such loans are beyond the scope of an article, but needless to say without proper guidance and hand-holding can prove to be an overwhelming experience at best.
Aside from being indicative of a homeowner’s desire to “stay put” and invest in what they already have and own, the increase in construction could also mean employment and social conditions are discouraging people from relocating. I would highly suggest that all factors of considerations be considered and evaluated before undertaking this overwhelming project. Parenthetically, I heard from Rabbi Yaakov Neuberger that one of his Rabbi’s translated the famous passage more literally and said, “Who is rich? One who is happy with his lot.” One needs to actually enjoy and delight in what they have and not merely be “satisfied.” Let us all enjoy our blessings! Special shout out and happy birthday to Ari Ashkenas, Rabbi Aharon Ciment, Tali Dulitz, Elissa Finkelstein, Tamar Hochstein, Sam Lighstone, and Etan Mirwis.
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