There are very few lenders who will offer land to construction to permanent financing, thus narrowing options to a home buyer, builder or renovator. Therefore, I have been on a quest to find a lender with reasonable terms for the borrower and a straightforward process for the builder or general contractor. The search is over. I have finally found a solution, “All-in-One,” which is a construction to permanent product for the home buyer who already owns land or wants to purchase land in conjunction with contracting a custom builder to build a home. Also, the program can be utilized to accommodate the borrower who wants to finance major renovations and additions to an existing home. Furthermore, I am comfortable with the lender’s team members, who promptly and efficiently process and close each loan application. Mortgaging programs available for this product are 30, 20 and 15 year Conforming and Jumbo, as well as 3/1 and 5/1 ARMS, both Conforming and Jumbo. These programs are available up to a 95% loan to value for new construction and 90% for rehabilitation. The lender offers 120, 180, 270 and 360 day locks for construction loans. The loan can be locked any time following the loan application, but must be locked two days prior to close. The project must be completed within the lock term selected. If the property cannot be completed within the lock period, the borrower may extend the construction timeframe. Typically, the cost associated with the extension is .50% for an additional 30 days. If needed, this extension can be pushed out to meet the completion time, but must be negotiated with the lender on a case by case basis. All-in-One also allows for a one time float down prior to the expiration of the rate lock term, provided the construction is 100% complete. The fee to exercise this option is $250.00 which is nominal when compared to costs of 1 to 2 points normally associated with this privilege. Furthermore, the borrower will be billed monthly for interest only on funds that have been disbursed during the construction period. Other minimal fees associated with this program include: Administration fee $500.00, Inspection fee $500.00 (5 inspections @ $100.00 each), Title Continuation fee $250.00 (5 Title Continuations @ $50.00 each). The above mentioned fees are fewer than imposed by most lenders. Establishing property value is dependent upon given scenarios. For instance, if the borrower purchased the property within the past 12 months, the lesser of land value or purchase price will be used to determine value. If the borrower purchased the land more than 12 months prior to loan application, the land value is established via an acceptable appraiser. If the borrower acquired land through a gift, the present site value will be used regardless of when the land was gifted. For rehabilitation, or home improvement loans, the appraisal should reflect the value “as per completed Plans and Specifications.” If the borrower already owns property or has existing equity in the property, the lender must be in a first lien position. The lender will pay off the existing land loan, if necessary, and will consider the existing land equity for a contribution toward the borrower’s down payment.
There are a number of qualifying criteria for both builder and project approval. A builder must complete a Builder Registration Form, which is a one-sided legal form page, requesting basic documentation: company information, principal officers, construction volume, insurance coverage and two material supplier references. The builder’s signature completes the application. In addition, the builder needs to provide the lender with a copy of a current contractor license (if applicable) and a current insurance policy including a declaration page showing appropriate General Liability and Workmen’s Compensation Insurance coverage. Items needed for project acceptance include: builder contract, complete copy of plans and specs, land acquisition contract or copy of deed if title is currently held by the borrower. A survey, appraisal, building permit and/or application for building permit with legal opinion for approval, along with a Five Stage Draw Schedule will complete the project approval. While this may sound involved, this application procedure has been greatly streamlined. Once the builder has been approved by the construction lending center, this documentation does not have to be provided for each new project. However, the lender may periodically request updated insurance and license information from the builder. Requesting a construction draw is as simple as completing a draw request form and faxing directly to the construction lending center. The turn around time for a draw request is typically five business days following the receipt of the draw request. Prior to disbursement of any funds, the construction lending center must obtain an acceptable inspection of work completed per the approved draw schedule. However, please take note that if the builder/contractor moves ahead of the construction schedule, the lender will fund for all work completed, regardless of draw schedule. In order to request a final draw, the home must be 100% complete and the lending center must receive and approve all final documentation. All remaining funds will then be disbursed and the loan will convert to permanent financing which is amortized over the remainder of the original loan term. To conclude, desirable aspects of the All-in-One loan offering feature: •
Various mortgaging options |
