When you decide to build a brand new home as an investment property and you’d prefer to finance both the construction and the permanent loan, your bank will provide you with their lending parameters. And if you’re building a higher end property, you may want to consider how much you can borrow,loan limitations both from a debt ratio perspective as well as following conventional lending guidelines.

Conventional loans are your primary choice when financing investment property long term. These programs offer the lowest long term rates and lower down payment requirements of any investment property mortgage yet they do have limits. In most parts of the country, the loan limit for a conventional, conforming note is $417,000. Anything higher than that is called a jumbo mortgage which can carry higher interest rates. In certain areas deemed “high cost” then the limits may be higher, up to $625,500 or more. This is important to know because obtaining long term financing means getting the best rate possible to increase your cash flow. Keep the loan amount at or below the imposed $417,000 limit.

You’re also limited by how much you can borrow. Your construction note will typically be an interest-only product, good for as long as it takes to build the new home. After that the permanent financing comes into play. The conventional loan approval dictates how much you can borrow not factoring the loan limit.

Regardless of any loan limit whether it’s $417,000 or $625,500 you must still qualify based upon your income and current monthly obligations. Just because the loan limit might be $625,500 that doesn’t mean you can qualify for the loan. You still must qualify based upon your own financial position. Both the loan size and affordability will ultimately determine how much is available to you. You can decide how much to borrow as long as your loan amount meets both guidelines.