A construction to perm loan for stick built and modular homes has a lot moving pieces just as building a house does and a popular question is “How does the construction perm loan process work?”.
Construction to Permanent Loan Process
- Complete loan application and pull credit
- Send you a detailed list of items needed to process your mortgage (tips for providing complete documentation)
- Send the required documentation to us including income, assets, and construction specific items such as:
- Copy of the deed to the property
- Signed contract with the builder
- Mortgage information for the land loan that will be paid off (if applicable)
- Get your builder approved with us if not already approved
- Provide us with a builder’s risk and permanent homeowner’s insurance quotes from your choice of insurance agent
- We provide you numbers for the construction perm loan including costs, payment, and rate
- Sign initial mortgage disclosures & pay for the appraisal
- We order the appraisal and title search along with process your file
- Once the appraisal is received, we tweak the numbers if needed
- Submit the file to underwriting for approval
- Lock your interest rate – The lock is a rate capped for 9 months after closing
- Draw schedule is set up with builder (up to 9 draws allowed)
- Close the construction loan:
- Land is paid off by the first draw
- Closing costs are paid by the first draw if you want to include in the loan
- Builder is paid their first draw of the contract
- As the home is built, you may pay construction loan payments that are interest only based on the balance each month – On VA construction perm loans, they are financed into the loan
- When the Certificate of Occupancy is provided, you can float your rate down if available for free (as long as your rate has not expired)
- Appraiser completes final inspection to show house is complete and the value has not decreased
- Attorney updates the title search
- Modification signing:
- Construction loan is converted to the permanent loan
- Homeowner’s insurance and escrows (if applicable) are paid and put in place
- First payment is lined up so it is due on the first of each month at the locked in rate
- First year of insurance(s) are paid, escrows are set up (if applicable), daily interest is paid to line up payment on the first of the month
- Move into your new home!
* Keep in mind that these are not every single step and each person’s scenario can be different but this gives a good idea of the process flow on a construction to perm loan.
For more details or to qualify for a construction perm loan, contact us today!