New, Better Construction Loans in The Villages!
Landmark Mortgage Planners is thrilled for the addition of our new series of One-Time-Close Construction to Perm Loans to our mortgage line up. While these new products are competitive in terms and pricing, they eliminate a lot of the big risks and obstacles related to the standard two-closing construction loan process. Additionally, our new VA and FHA options open up construction prospects to those lacking a big down payment.
The Problem with Traditional Construction Loans
There are risks commonly connected to the construction loan process that are largely reduced or entirely eliminated with Landmark’s One Time Close Construction to Perm Loans. Usually, during the construction period, a temporary construction loan is attained wherein interest payments are made during construction, and when construction is finished a new permanent loan package is put together and submitted to underwriting. Before the new owner can take possession of the property, this new loan must be closed. One of the major disadvantages to this traditional construction loan approach is that the borrower is usually obligated to make interest payments on the temporary loan while also paying to live in their current home. All this often comes after draining their savings for the down payment. Outside of this inconvenience, there are many other risks related to this old case scenario. If the borrower’s credit position undergoes change at all throughout the construction period it could result in the final construction loan being declined and a lot of disappointment. There’s much that can happen in 9 months such as job changes (lost overtime, downsizing, and layoffs), new debt (which could come in the form of new purchases or even unexpected debt such as hospital or medical bills), interest rate increases, old credit problems resurfacing, changes in minimum payments, changes in underwriting guidelines, a decline in home value, and even standard inquiries on your credit could lower your credit score or increase your debt ratio resulting in a rejection on that permanent 2nd loan. And if after all of this the 2nd loan is still approved, it can take weeks to get the package to closing once construction is finished, AND you have a 2nd set of closing costs.
Landmark Mortgage has a better way!
Benefits of One-Time-Close Construction Loans
Considerably Lower Risk: Our process includes only one loan that you need to get approved and close only one time. That means there is absolutely no chance that after building your dream home you won’t qualify for the permanent loan.
Lower Costs: In order to make things way less expensive, there is only one loan and therefore only one set of closing costs (many of which can be built into the new loan or paid by your builder).
Lower Rates: You can lock our interest rates in so that’s it is capped at its maximum for the duration of your construction. But it gets better! If the rates go down during construction, we’ll give you the better rate!
Lower Down Payment: We have FHA and VA construction loan options to offer with the same benefits as our conventional construction loan, however with a significantly lower down payment required. Because of the recent real estate and mortgage crisis, typical construction loans entail a 30-40% down payment. However, our FHA construction loans requires only 3.5% of the whole project down, and our VA construction loans requires no down payment whatsoever!
More Flexible Underwriting: Lenders can afford to be more flexible in their underwriting because we now have construction options backed by VA and FHA. Now we can get approvals for individuals with credit scores as low as 620, as long as they have 3 trade lines of credit that have been paid on time and a good work history. Additionally, instead of the stringent 28% housing ratio enforced by most construction loan underwriters, we can go as high as 41% on our VA construction loans.
Landmark’s Construction Loan Process
The very 1st step is to get pre-approved for one of our construction loan programs. The best way to do this is to schedule an appointment with one of our construction specialists. They will tell you what documentation
you will need, what questions to ask your builder, how much you qualify for, and what your expected monthly payment will be.
Next, you need to meet with a builder to discuss your dream home and get a projected building cost. We understand this is the more exciting part, however it is essential that you don’t just skip right to this step. There are going to be some things you need to know before you meet with a builder such as:
• Is your builder approved for your program or will we need to submit a builder package to the lender?
• What is your maximum cost to build?
• Does your program require the builder to pay certain costs for you? And if so, how much?
Although you need to have a piece of land to build on, it is NOT NECESSARY TO OWN A LOT prior to your project. We can include the purchase of land in your loan, however we will need a purchase agreement for the land to begin your construction loan. If you have had land gifted to you or already own your land, we can use the equity in the land as a portion or all of your down payment.
Once you have been pre-approved, a location for your new home, and a cost to build provided by your builder, we can structure your construction loan and start the loan process. A certified appraisal will be finalized according to your land and the builder’s home specifications. Your loan will be underwritten and processed much like a normal mortgage loan, and once approved will close at a title company. Any amount owed on your land will be paid in full at closing from the proceeds of your new loan.
After closing, the builder will access the loan assets through a series of draws in order to build your new home. To ensure the builder is completing your new home according to code and the original specifications, inspections will be done throughout the building process. We will automatically build in a 5% contingency because there are often changes during the construction process. Additionally, we can build in a fund for the interest payments on the amount borrowed during the construction process so you won’t have to make payments until your new home is complete and ready to move into.
Once your home is finished and we receive a certificate of occupancy, we will finalize your loan for the total amount accumulated and repay it over thirty years (or other period approved on your loan). This does not entail a new closing, new loan approval, or new set of closings costs because it is all built in to the original construction loan! You move and enjoy your new home right away.
What are you waiting for? Now is the BEST TIME to start building your dream home! Rates are low, builders are making great deals, and there is now a construction loan program to make it all possible.
Contact Landmark Mortgage Planners today to schedule your appointment with one of our new home specialists!