New, Better Construction Loans in Ocala!
Landmark Mortgage Planners is very excited to add our new series of One-Time-Close Construction to Perm Loans to our mortgage line up. These new products are competitive in pricing and terms, while eliminating a lot of the major risks and roadblocks associated with the standard two-closing construction loan process. In addition, our new FHA and VA options open up construction opportunities to those lacking a large down payment.
Problems with Traditional Construction Loans
There are risks commonly associated with the construction loan process that are significantly reduced or completely eliminated with Landmark’s One Time Close Construction to Perm Loans. Traditionally, a temporary construction loan is obtained during the construction period. Interest payments are made during construction, and when construction is complete a new permanent loan package is put together and submitted to underwriting. This new loan must be closed before the new owner can take possession of the property. One of the biggest disadvantages of this traditional construction loan approach is that the borrower is typically required to make interest payments on the temporary loan while also paying to live somewhere else. This is often after draining their savings for the down payment. Beyond this inconvenience, there are a lot of other risks associated with this old case scenario. If the borrower’s credit position has changed at all during the construction period it could result in the final construction loan being declined and a whole lot of disappointment. There are many things that can happen in 9 months: job changes (like downsizing, lost overtime, and layoffs), interest rate increases, new debt (which could be new purchases or even unexpected debt like hospital or doctor bills), changes in minimum payments, old credit problems resurfacing, 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 causing a rejection on that permanent 2nd loan. Even if the if the 2nd loan is approved, it can take weeks to get the package to closing once construction is complete, AND you have a 2nd set of closing costs.
Landmark Mortgage has a better way!
Advantages of One-Time-Close Construction Loans
Significantly Lower Risk: Our process involves only one loan that you need to get approved and close one time. That means there is no chance you could build your dream home and then not qualify for the permanent loan.
Lower Costs: Because there is only one loan, there is only one set of closing costs (many of which can be built into the new loan or paid by your builder), making our way a lot less expensive.
Lower Down Payment: We have VA and FHA construction loan options available with the same advantages as our conventional construction loan, but with a much lower down payment required. Since the recent real estate and mortgage crisis, typical construction loans require 30-40% down payment. Our FHA construction loans requires only 3.5% of the entire project down, and our VA construction loans requires no down payment at all!
More Flexible Underwriting: Because we now have construction options backed by FHA and VA, lenders can afford to be more flexible in their underwriting. We can now get approvals for individuals with credit scores as low as 620, provided they have a good work history and 3 trade lines of credit that have been paid on time. And, instead of the stringent 28% housing ratio imposed by most construction loan underwriters, we can go up to 41% on our VA construction loans.
Landmark’s Construction Loan Process
The first step is to get pre-approved for one of our construction loan programs. The very best way to do that is to schedule an appointment with one of our construction specialists. They will tell you how much you qualify for, what documentation you will need, what questions to ask your builder and what your expected monthly payment will be.
Next, you need to meet with a builder to discuss your dream home and get an estimated cost to build. We realize this is the more exciting part, but It is important that you don’t just skip to this step. There are things you are going to want to know before you meet with a builder:
• Is your builder approved for your program or will we need to submit a builder package to the lender?
• Does your program require the builder to pay certain costs for you? And if so, how much?
• What is your max cost to build?
And, 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. But, we will need a purchase agreement for the land in order to begin your construction loan. If you already own your land or have had land gifted to you, we can often use the equity in the land as all or a portion of your down payment.
Once you have a pre-approval, the location for your new home, and a cost to build from your builder, we can structure your construction loan and begin the loan process. A certified appraisal will be completed according to the builder’s home specifications and your land. Your loan will be processed and underwritten much the same as 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 funds through a series of draws to build your new home. Inspections will be done along the way to ensure the builder is completing your new home according to code and the original specifications. Because there are often changes during the construction process, we will automatically build in a 5% contingency. We can also build in a fund for the interest payments on the amount borrowed during the construction process so you won’t have a payment until your new home is complete and ready to move into.
Once your home is completed and we receive a certificate of occupancy, we will finalize your loan for the total amount accumulated and amortize it over 30 years(or other period approved on your loan). This does not require a new loan approval, new closing, or new set of closings costs – it is all built in to the original construction loan! You move in right away and begin to enjoy your new home.
So, 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 now there is 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 today!