Bank lender project review for new construction

[ryan_gz]

Anyone have any advice on project review for a new construction building? I hear you're supposed to get a lender involved by the condo declaration stage.

I also hear that the smaller you go in terms of total units, the more stringent the banks will be. For example, a 2-4 unit condo new development will be tough. For 5 units and above a mortgage banker told me that you can get what's called a PERS (Project Eligibility Review Service). This makes it easier because if Fannie says yes then anyone can lend to buyers through Fannie.

Fannie does sometimes require a reserve study I've heard. For non gut rehab Freddie Mac does not I've heard.

I also hear that banks, Fannie and Freddie make a big stink about the percent of the building that's designated for commercial usage. Fannie allows max 20% commercial space while Freddie makes some exceptions up to 30% (Chase told me that 90% of their work is done through Freddie).

I've also heard about some exceptions for more reputable sponsors, with banks allowing up to 45% commercial.

And once you get your presales up to a certain percent then banks will start financing regularly, I hear the number to hit is 50% pre sold right?

[aslan]

I would definitely do some more research first before diving head first into a new development project, even if you're doing a small building.

If any lenders or Fannie and Freddie want to do a reserve study, there are ways you can reduce the requirement by putting less into reserves in exchange for upgrades to the building. That's a smart win win strategy.

In terms of exceptions, individual buyers can apply for them with their relationship lender usually if they have a depository relationship of at least $50,000. You can also request an individual exception with Fannie and Freddie directly.

Freddie is generally easier vs Fannie Mae for new development condos.

You can also develop in phases. It's called phasing, which is basically conversion in stages. I.e. finish and close the first 5 floors before you finish the rest

Finally, remember that NY State requires an architect or engineer's report on structural soundness. This report needs to be done in a "professional manner."

Lastly for appliances, remember that the Martin Act requires you to replace them with something of comparable quality if they deviate from the brands advertised in the offering plan.