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Residential Construction Loans

Today's modern day construction loan is usually a one-time close, one set of loan fees construction to perm or permanent loan. The construction loan includes the construction loan period and long term financing to build a dream home. Construction Lending Features:

Construction Lending Features:

  • Lot Loans
  • Construction
  • Demo & Rebuild
  • Remodel
  • Rehabilitation

Lot loans up to $2,000,000

Construction financing to $3,000,000 standard and up to $10,000,000 for High Net Worth individuals.

Lock permanent loan up-front for up to 24 months on ARM and Fixed loan products.

Construction Loan Highlights

Construction Loan Overview
Single close construction to permanent financing.

Purpose of Construction Loans
Purchase, finance and cash-out refinance

Products/Pricing
Construction phase: Prime based, interest only based on the amount disbursed. Permanent phase: Lock First allows the permanent financing to be locked prior to beginning construction. Lock After floats the permanent financing until after construction is completed.

Processes
Modified/Standard (Full Doc)

Occupancy
Primary residence, second home, investment (rental) property.

Property Type
New construction, remodel or rehabilitation of: 1 unit, PUDs Attached and detached dwellings (i.e. PUDs, town homes) are permitted for both ground up and remodeling. 2 Units. Pre-starts (homes already under construction) are permitted provided there is no delinquency on the existing construction financing.

Not permitted: Condos, coops , development projects and spec homes commercial, mixed use, apartments.

Construction Loan Terms
Construction phase (months) 4, 6, 9, 12, 15, 18, 21, 24

Interest Rates
equired Standard. Can be waived under certain circumstances.

Contingency Reserves
Required Standard. 5% on Ground Up and Non-Structural Rehabs. 10% on remodels. Can be waived under certain circumstances.

Owner/Builder
By exception only. Owner/Builder requires a licensed contractor as a project manager. Specific requirements apply throughout the construction phase regarding the Project Manager's responsibilities.

Draw Allowance:
Construction term: <=6 mos.: 5draws, 9mos.: 9 draws, 12 to 15 mos.: 14 draws, >=18mos.: 18 draws. Additional draws can be purchased for $150/each

Appraisals
For loan amounts greater than $1,000,000, 2 appraisals are required. Appraiser must be on the lender approved list.

Special Construction Reserves
Transition Ratio
6 months PITI - conditions apply
Waive Financed Interest Reserve

Pre-Closing Asset Accounting
In addition to brokerage accounts, retirement accounts, bank account balances, etc., recent (within 24 mos.) payment toward lot purchase, and prepaid expenses for hard and soft costs related to the project can be considered as pre-closing assets (if properly documented).

Modified/Standard (Full Document)

Purchase and Rate/Term Finance

PrimaryLTVLoan AmountFICO
 75%$1,000,000680
 80%$2,000,000720
 75%$2,000,000680
 70%$3,000,000 and above 60 to 70%

Credit Score and Qualifying Ratio Requirements

ConformingFICOMax Ratio
Salaried>=70050.00%
Self-Employed>=70040.00%

Preferred Documentation Features

Salaried (two year work history required)
1 YTD pay stub (most recent computer generated), 1 W-2 Form (for most recent year)

Self-Employed (Borrower owned for 2 years minimum)
1 year 1040 (pages 1 & 2 only of most recent year), Sched. A required for commissioned income.
Not Required: Business Returns, K-1s, Balance Sheet, P&L.

Bonus/Overtime
Same as Salaried. Average of YTD &w-2

Commission Income
If commission income is <25% of total, use salaried doc.
If commission income is >=25% of total us Self-Employed documentation.

Other Income Sources

Assets
Purchase: 2 month bank statement. Refinance: Not required

Reserves
Purchase: 6 months PITI. Refinance: None. Subject to additional construction reserves requirements (i.e. Transitional, Contingency & Interest Reserves)

Important Documentation Requirement
Signed 4506-T required