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!