Construction loan to build house in Puerto Rico

Hi NobodyCares,

I would like to inform you that i have created a new thread with your post in the Puerto Rico forum so that you can get better and quicker feedback from our members.

Thank you,

Priscilla
Expat.com Team 

thank you

Just a tip to win an approval construction loan. Be good or to have good credit to reduce the risk. Lenders require borrowers to have a credit score of I think 680. I believe you can work on that in Puerto Rico too. Try FirstBank VI in Puerto Rico. God bless!

I can only tell you about my experience, so far, with Banco Popular.

They require a 750+ Fico score. If you own the property, they will only give you 45% of its value as equity. If you don't, they will finance the land, max 50% but, this will cause issues with a construction loan as they only allow you one loan at a time. They did say there was a way to consolidate. I bought the land for cash so didn't pursue  this. The max loan to value is 70%, so understand what the likely value of the finished home will be before you go down this path.

The construction loan has an interest rate of 4.5% with 9.25% APR as they charge 4 points. Additionally, they told me they would not even review an application until all drawings, approvals, permits and even a signed contract with a qualified builder, 3 references, were in place.

Then they said the minimum time to review the loan would be 90 business days but, that I should expect it to take 180 business days. When I queried then on days versus business days, it was as you would think. About 22 business days in a month. So 4.5-8.5 months to get the loan approved.

That is why I asked if there were other lenders.

Hello Mr. Cameron,

Thank you very much for the information. I already have a pre-approval letter for $320k. I already have architect plans already approved. I just do not have the land and I need someone to build. The pre-approval is only good to purchase a house and a new construction (I think). I heard many bad stories about Banco Popular. They do not seem so popular in Puerto Rico, lol. I'm going to try working with 1st Bank. A lot of Veteran's that I know say that are a great bank. Just wondering if 1st Bank will approve me for a construction loan? Oh, In case you are wondering my pre-approval is in the United States. A real estate agent in Puerto Rico said I can still use it in Puerto Rico. When I go to purchase a house there I have to do the pre-qualification there. My head is swirling with so much information from everyone I'm starting to get a headache.

Hello Monique6994,

I already have obtained a pre-approval letter in the amount of $320k. I'm just trying to understand the process in getting a loan in Puerto Rico from the bank in order to build a house. I thanked Mr. Cameron for the information he kindly shared with me. I would like to also thank you for sharing your information with me. Doing things in Puerto Rico takes time to do because time is slower there, lol. Things of this nature in the U.S. move so quickly but in Puerto Rico it is 3 to 4 times slower to get something done.

Hello NobodyCares,

I am trying to get the same information about getting a construction Loan to build in Caguas.  I already have my land and it's paid for.  I am a veteran and , gracias a Dios, I am not worried about my credit score, I just need to find the right bank.  I was lucky to find an excellent Architect in San Juan.  The design is completed and we are now bidding for contractors. 

For veterans, I would suggest looking at PenFed (Pentagon Federal Credit Union).  They have a branch at Fort Buchanan and maybe elsewhere in San Juan.  I am not too crazy about their customer service but I am very patient, which is good if you are planning to relocate to the island and interact with their public services there.  As a veteran, if you can secure a VA loan, that will save some money on the different fees that come with applying for a mortgage loan.  So PenFed, First Bank, and Banco Popular are the banks I am going to try for a loan.  Wish me luck and I wish you the same.

Rudy

NobodyCares,

Make sure you check with the bank that you have the pre-approved loan with.  Some banks on the mainland will not approved construction loan for Puerto Rico,  I am with USAA and they told me that they will only approve finance for homes that are already built. 

Rudy

I was told from a 1st Bank rep, which means I can't be sure, that 1st Bank does not do construction loans.

I have learned there are several local credit unions and that several do construction loans. However, the ones I have been in contact with require a licensed, in good standing, general contractor. You cannot be the general yourself.

That means the bank  should be able to help with contractor selection and they will inspect before paying for each stage of construction. One will lend 80% the other 85% on the appraised value.

To get to their ability to appraise you have to have plans, government permits and certain other prerequisites, for example an ARB approval.

Hope this helps.

Rudy, try the local credit unions.

Hey William,  what did FEMBI say to you?

They said they would look at it but, they use individual investors and we're not positive they would get one to fund the loan. I would need to go back when I am closer.

Hi William,

Great information!  That is helpful.  I am heading to the island next month to specifically look into financing.  I do like the fact that the bank/credit union do a thorough check on the prospective contractor and inspect at each phases before disbursing funds to make sure that construction progress is occurring as agreed by the contractor.  Someone mentioned FEMBI, I heard of them but have not checked yet.  Thanks for the feedback.

Rudy

Yeah speak to Javier Carvajal at FEMBI he's a great guy very helpful always answers his calls and emails.

Hello Rudy and William,

I'm currently working with 1st Bank in Mayaguez to buy a house. I would rather have a house built for me instead of buying one already built. William what are the names of the Credit Unions that do construction loans? I already have plans and a contractor. Buying the land is not an issue for me. Finding a bank that does construction loans is my problem.

I think the credit unions stay close to home. I am on the east side. My guess is Rinco, Mayaguez and Agudilla likely have them.

Here it is Los Pierdras, and San Lorenz, ( I probably miss peels them) near Humacao and Caguas.

I just did a simple google search …”Puerto Rico Credit Unions”

A list and map came up. If you zoom in to the west side several show up.

Good Afternoon All:

Great!  Still searching so I hope to make progress with either Fembi or one of the credit unions on the Island.  Checked with PenFed this morning and they don't do construction loans, just mortgage for existing houses.  I will update if I make progress.  Thank you for the feedbacks. 

Rudy

Hello G1977,

Do you have phone # or email address for Javier Carvajal that you can share?  Thanks.

Rudy

[email protected]
787 378 3345
Tell him George Murillo recommended you. He's very knowledgeable ask him anything.  Goodluck!

Great!  Thank you George!

Thanks William!

I'm in the process of buying property in Hucares Naguabo.  Would you mind sharing the architect contract info.  Thanks
I'm going to check Navy Fed to see if they do construction loan

Ana,

This is from my architectural design contract….

“For Design services I propose a fixed fee of $xxxxx based in our Puerto Rico Professional Practice Manual Fee table with payments allocated as follow:

At contract acceptance ............................................15%
Schematic Design ..................................................... 20%
Preliminary Design .................................................... 25%
Construction Documents 50% ................................... 20%
Construction Documents 100% ................................. 20%”



The overall fee was 10% of the estimated construction cost.

There are additionally fees if you want them do do some supervisory work during the project.

I believe you can search for the professional practice manual.

And I think the fees range from 9-12% depending on the project.

Nobody cares -
It could be your preapproval is from a specific bank that is in PR, but I was told by my bank/mortgage company they will not mortgage a property in PR and as I did more research it seemed fairly consistent to need a lending institution in PR due to their different laws. Also, for land be sure to get a title search we were ready to put cash for properties to begin building all to find out the land is still in probate with the 2 prior owners. That will take years to resolve.

William - would you be willing to share the architect and the builders you are reaching out to?

I was away for a couple days so sorry for the delay. My architect is Vanessa Sifontes.

Her mail is [email protected]. We are very happy with her..

Ana, see the post below for Vanessa's info.

Hello a Todos,
I discovered this forum today and I want to share my experiences and plans to maybe helping someone but definitely to learn from you as well.
We bought a piece of land and are going to build our retirement home soon. We are paying cash, so financing is not an issue. We want something modest that we can build for the next 18 months before we retire. We're working with an architect already, but before breaking ground, we began building a small guest house in another part of the lot so we have a place to stay. The reason I don't want to build and use banks in PR is because they are a pain in the neck, as some have expressed here already. In addition, contractors are like anywhere else, some goods, some bad, and some are real ugly to deal with. Not to scare anyone but it's definitely easier and less headache financing something already built. We bought a 1.75 acres land and to make easier for us to supervise our investment we want to have a place to stay. We almost bought a camper trailer to crash there regularly once the construction starts. Instead we are building an AirBnB small house in a wooded area that we can use also for ourselves. Just an idea, I'm from PR and at my age, I don't want to deal with all the hassle that this type of projects bring.
Regards…

I am also trying to build a home in Aguadilla, PR.

After some research I found out that many of banks do not provide Construction loans.
The land realtor told me that Banco Popular and a local credit union had made a deal with the land owner to provide that type of Construction Loan.

The latest information I received today was that the land can only be financed @ 45% and the home construction (builder) @ 75%. Therefore, my interest is  4.5% API @ 4.757 %

I hate to pay this much interest when they are so low in the mainland.

I have a suggestion, this is if you own your own home, refinance your mortgage cash out the equity on your existing home rates are much lower. That's what I'm doing.

Just got pre-approved today.  Cooperativa de ahorro y credito de Cabo Rojo 4.5% - Construction Loan - 30 years - They finance 85% of the LTV

Yes, that's the same rate I got with Banco Popular. I wish it was much lower.

How long did the loan process take?

That's exactly what we did. We have cash for the down-payment but I wanted to get the lowest rate.
Should we payout the land at 100% and just finance the construction loan? Or do it this way to keep some extra cash for any  unexpected or future charges?

Wow good question, you need to do whats most comfortable for your situation. I would suggest use the banks money. The bank will send an inspector to check every stage of the construction before paying the contractor a dime. Save your cash till the end then you can pay it towards your principal. Hold on to your cash for any unexpected situation that may arise. Good luck!

I am in the process as we speak. I had all the pre-approvals but we just signed the contract with the builder and are now  doing the finance. They can do it remotely since I'm in the mainland.
We are only pending 3 documents that need to be filled out and signed by the builder.
I started the official process last week. I know that EVERYTHING takes so freaking LONG in PR I am born and raised there but now that I live in the mainland......I can't take the slowness. LOL
Therefore, I'm on top of things. If they send me the docs; I stay up and send everything back immediately. I wait one or two days tops; and I'm already sending emails, text, etc. The same with the builder's paperwork and their process. I'm always asking , how long would this process take? What else do you need? etc. :-)