Construction Loan Article Center
Tuesday, August 30, 2005
These programs combine the construction and permanent financing of your project. You qualify for the loan once, lock in the permanent rate, sign one set of loan documents and have up to 12 months to complete the construction!
During the construction period, interest is charged only on the funds that have been disbursed. When the project is completed, the permanent loan period begins.
Depending on whether you can fully document your income or not, you can finance up to $3,000,000 and up to 90% of the future value.
Please call us at 1-800-246-2468, with any questions that you may have. Or send an email, for a prompt reply.
How Does It Work?
This is a "One Time Close" construction loan program to finance the construction of a primary residence or a second home providing both the construction financing and permanent loan all in one closing. This means that you sign only one set of loan documents and do not have to worry about re-qualifying, re-appraisals, additional closing costs or signing additional loan documents.
You can lock in the permanent rate at closing, and have up to 12 months to complete construction. During the construction period, interest is charged only on the funds that have been disbursed. When the construction is completed, the permanent loan period begins.
Unlike a purchase transaction of an existing home, a Construction To Permanent loan involves determining the value of something that is not yet constructed! To assist the appraiser and the lender in determining the value of the home after it is built, information must provided as to:-
What is going to be built or constructed?
What materials are going to be used?
How much will the material cost?
How much is the actual work going to cost?
How much did the land cost, what is it worth today?
How much will be spent on plans and permits? You will have an other very important item to be concerned with, which is your choice of the general contractor who will be awarded the contract and the actual text of the construction contract.
From the general contractor, we will need a resume and a builder's application to be completed along with a credit check. This is for your protection as well the investor's, and ensures that he/she is experienced, has a proven tract record, and will be able to perform under the terms of the contract. Each general contractor approval is good for six months. The fact that we approve a general contractor should not imply that we guarantee his/her work and/or performance.
The actual text of the construction contract is included in our application package. This is a standard contract that should be used. You should avoid using the services of a contractor who insists on using another text.
In addition to the above, we will of course need the standard income and credit documentation that is required in any real estate transaction.
Basic documentation requirements are explained in more detail in the "Documentation Requirements" page. For a pre-qualification however, all you need is to complete the simple online secure application .
Please call us at 1-800-246-2468, with any questions that you may have. Or send an email, for a prompt reply.
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Construction Loans seem to follow stages. What are they? Though this may vary from project to project, there is are logical steps at which construction loans guidelines allow disbursements to be made.
The eight main stages of construction are:
Site Excavation, Grading and Foundation.
Framing, Walls and Roof
Mechanical Systems,. Plumbing and Wiring
Exterior Wall Finishing
Drywall Installation
Interior Trim, Cabinets and Fixtures
Painting, driveway Installation and Certificate of Occupancy
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Just like a purchase mortgage loan Loan, construction loans are made on the bases of Loan To Value, commonly abbreviated as LTV. This is the number obtained by dividing the Loan Amount by The Value of the Property.
For example, if you purchase a property for $100,000 by putting $20,000 down and obtaining a $80,000 loan, then your loan’s LTV is 80%.
In the case of construction loans however, Value refers to the appraised Future Value of the Property.
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