On this page : Overview
of Construction Loans -Stick Built and Insulated Concrete Form
(ICF) l Manufactured
Home, Log Home, Panelized and Modular
Construction loans
can bring excitement as well as stress. An inexperienced loan
originator that says "no
problem" to all your questions will cause a nightmare for
you and may not even be able to close the loan. A highly skilled
Senior Mortgage Banker, like Theresa Springer, will help you
through the process reducing the stress and ensuring that your
loan closes properly.
While working with your builder, you need to keep things moving,
and allow for delays beyond your control. Your construction specialist
will be dealing with the appraiser, Escrow Company, underwriter,
Construction Review Department and many others, as well as advising
you through the process.
Theresa is a Senior Mortgage Banker with over 20 years of experience
in construction lending, and is well know for her expertise in
the industry. The loans Theresa works with have no lot size limits,
and loan limits up to a maximum of $2 million. Gentlemen farms
are acceptable on a case by case basis. Land zoned Forest Deferred
or Agriculture (Deferred also) is fine as long as there are no
ongoing farming (including logging) operations involved on the
land that home will be constructed on and included in the loan.
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Overview of Construction Loans -Stick Built and Insulated Concrete
Form (ICF)
Most of the Construction Loans we do are "One Time Close" or “All
in One” which saves you money by not paying loan fees on
two separate loans. The traditional way people built homes was
to take a construction loan, then apply for a "take out" permanent
loan once the house was complete to pay off the construction
loan.
Construction/perm loans can be used to build a new Primary Residence
or Vacation Home, or in some cases an Investment (rental) property.
The property is appraised as though your home is complete based
on a full set of plans including the site plan and a set of specifications
(specs) from your builder, and the complete and fully executed
construction contract you and your builder have agreed upon.
The cost of your home is based on the amounts for the land purchase
(if you already own the land then its appraised value), and all
that is included in the specs.
From that information Theresa will develop what is called an "Acquisition
Cost or Acquisition Value." Your loan amount is based on
a percentage of the Acquisition Value or Loan to Acquisition.
Some people confuse Acquisition Value with the appraised value.
The appraised value only supports the acquisition value and the
only time it is used to calculate the loan to value is when the
appraised value comes in less than the Acquisition Value.
Permits are required to be purchased prior to the loan documents
being drawn and can be reimbursed in the first draw as can any
properly documented pre-paid items that are not soft costs, i.e.
plans, surveys etc.
There are three separate underwriting processes in a construction/perm
loan:
- The Borrower
- The Builder
- The Project
Construction/perm loans are very complex since there are these
three separate underwriting stages so patience is a must.
Once the loan is funded after you have signed the loan papers,
the first "Draw" is normally used to pay the purchase
price of the land. If you already own the land or home, the first "Draw" pays
off the existing mortgage and your closing costs. Then your builder
starts on the construction. About once a month, the builder will
ask for another "Draw" to be paid for work completed
and installed on the project. These Draws are usually paid to
the builder but you must sign with the builder the draw request
for the bank. When you request a Draw, the lender sends out an
inspector (usually within days) to review the work and then the
lender completes and issued the draw funds per the construction
loan agreement. Most loans will use a monthly draw system but
you can always ask for additional draws – but there will
be a fee.
Each construction loan deals not only with the final permanent
loan you are normally familiar with, but also how to finance
the land purchase and construction costs to completion of the
dwelling. There is a "Construction Period" and a "Permanent
Period" to your construction loan. The construction period
consists of a construction line of credit that your builder draws
upon until the project is completed as explained in the paragraph
above, then when construction is done and closed during the 30
day modification period in between the two parts, the permanent
terms of the loan agreed to at closing start. Construction/Perm
loans are arranged for a construction term up to eleven months,
the 12th month is the modification period. This is when the mortgage
payment starts that you pay per the terms of the loan, i.e. 30
year fixed at xx.xx% rate.
You can make payments on the loan during the construction period.
Normally you would just pay interest only payments each month
on the balance of the loan as Draws come out of the bank. You
can also set-up an interest reserve as part of the loan to pay
the payments for you during the construction phase until the
house is complete. This option allows you to not make any payments
on your new home until it is completed. There are pros and cons
to this and you need to make sure that if you decide to go this
route you understand what it entails.
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Manufactured Home, Log Home, Panelized and Modular
Manufactured housing is a little different than stick built.
These homes are delivered as a package or in multiple packages
called drops. The land can be financed as part of the loan package
or paid in cash or a structure somewhere in between.
You pick out your manufactured home at the dealer, make an offer
on a piece of land to put it on if purchasing at that time and
contract with a contractor that will set up the home on the land
with any work that needs to be done. Many times your manufactured
home dealer will have recommendations for contractors to do this.
This also is appraised as though it complete with the plans and
specs of the manufactured home. There are special forms for the
Plans and Specifications on Manufactured Home Land packages as
there are obvious differences from building a stick built house
from the ground up. One very big difference is that the dealer
will want to be paid as he delivers the manufactured home to
the site. This must be arranged in advance and the inspector
must be at the lot at drop. These need to be new homes, not ones
bought used and moved.
USDA Construction/Perm for Manufactured Home
The USDA Construction/Perm loan is a package drop type construction
as above, but there are income and location limits on the loan.
Also these loans are for new manufactured homes only and you
must work with a USDA approved manufactured home vendor.
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Experience extraordinary...
Call Theresa Springer today at 360-210-7984 to
see the difference that working with an experienced home
loan professional can make for you. |
Custom
Construction Loans 
