Land development loans, construction loans

Question 1

What are land development loans?

Answer 1

used to finance installation of on-site and off-site improvements

Land development loans are critical for preparing land for construction by covering costs related to infrastructure and utilities.

Question 2

Construction loans disburse in payments called ___

Answer 2

draws

Draws are scheduled payments made to the borrower as the construction progresses.

Question 3

A blanket mortgage pledges ____ parcels

Answer 3

several parcels

Blanket mortgages are often used in real estate development to secure multiple properties under one loan.

Question 4

What does the partial release clause provide for?

Answer 4

provides for the release of individual parcels from the blanket mortgage lien

This clause allows for flexibility in selling or refinancing specific parcels without affecting the entire mortgage.

Question 5

What is a takeout commitment?

Answer 5

A lender’s written commitment to provide permanent financing when the project is completed

This commitment ensures that once construction is finished, a long-term loan will be available to pay off the short-term construction loan.

Question 6

What is a buydown used for?

Answer 6

to temporarily lower the interest rate

A buydown can make monthly payments more affordable by reducing the interest rate for an initial period.

Question 7

Typically, you would pay a lump sum at closing to reduce your interest rate for a specific initial period (typically the first one to three years of the loan). This describes a _____

Answer 7

buydown

Buydowns are particularly useful for borrowers expecting income increases or changes in financial circumstances.