The Entire Loan Process from Start to Finish- New Construction

Posted by Dietchi Thomas on Wednesday, October 26th, 2016 at 2:22pm.

Construction Perm Loan Process from Loan Application to Moving In

VA & FHA construction perm loans with one-time close

VA & FHA construction perm loans with one-time close

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!

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