The first of our Construction Mortgage Blogs covered the basics of what you would need to know for this complicated mortgage type. In this second part, we will cover three key areas: The budget, the loan, and key take-away points.

1. The Budget

The budget is the most important piece of information that the lender wants to see. It should include “hard” and “soft” costs. There is usually “reserve” money set aside to ensure there is enough money in the anticipated event of over budget costs. The “reserve” money is usually 10%-25% cash flow based on the budget for the project. This is on top of the down payment.

This table denotes common soft and hard costs that should be included in the budget: