When it comes to construction loans for building houses, there are two primary options people use.
First, there is a traditional two close in which the borrower or builder finances the construction of the home and then the borrower gets a permanent loan once the house is built to payoff the construction loan.
Second, there is a one-time close construction loan. The one-time close has some advantages over the traditional two close option. For starters, the buyer is approved up front prior to any construction and doesn’t have to qualify again when the home is complete. This option is usually also cheaper overall because it doesn’t have closing costs twice. Although closing costs are higher for the construction loan, the overall total is still usually lower because they are just paid once since there is no permanent refinance or purchase loan done after the house is complete. Another advantage of this option is there is no appraisal upon completion which means the appraisal is done up-front and you know what value is being used for loan qualifying purposes. For more detailed information, click the option below. Click here to compare options.
Construction / Renovation Lending
We have some construction options as well as a line of credit loan product. We also work with several banks and credit unions that provide excellent terms for interim or construction financing. We still take you through our approval process to make sure you will qualify for the permanent financing, once your home is built. We also go over things to plan for and watch out for to make sure your income, credit, loan to value, and other aspects of your loan are planned so that you still will qualify when the time comes for your permanent loan. We also give you a permanent loan pre-approval letter that helps secure the construction loan.
What’s a One-Time Close loan? As its name implies One-Time Close (OTC) is a Construction-to-Permanent loan program that offers all-in-one financing. Available for manufactured, modular, and stick-built homes, OTC loans allow borrowers to finance the construction of a home, lot purchase/land payoff, and permanent mortgage with just one closing.
Designed to simplify the financing process for new home buyers, our One-Time Close offerings include FHA, VA, USDA, and Conventional programs. Faster turnaround times, low construction admin fees, and the ability to apply various down payment assistance programs are just a few of the ways we apply our expertise to one-time close lending.
Loan Product Options: FHA, VA, USDA, and NOW Conventional! One-Time Close is available for FHA, VA, USDA, and Conventional loans, making it accessible to more eligible borrowers. Thanks to One-Time Close, a buyer’s first home could be a brand new one! Maximum LTVs:
- FHA: 96.5%.
- VA: 100% not including VA funding fee.
- USDA: 100% of market value.
- Conventional: 90%, or up to 97% when an eligible CHOICEHomeSM property is combined with the HomePossible® or HomeOne program(s).
More Information: One-Time Close simplifies the construction loan process, which benefits all parties involved. Some of the advantages to an OTC loan include:
- Options to have no payments due from borrower during construction.
- Generally no re-qualification once the borrower is approved and no property value re-certification required (FHA, VA, and USDA).
- Single close reduces total closing costs.
- Mortgage broker commission / mortgage correspondent purchase advice paid in full at closing (prior to construction commencing).
- Realtor commissions generally paid in full at closing (prior to construction commencing).
- Single construction administration fee which includes: construction interest, construction draw inspections, construction closing coordination, construction underwriting, and title updates.
A line of credit is a great solution for spec home lending. This option allows us to approve the borrower or builder up front, then come back and approve the property aspect of the deal separately. This is allowed for multiple build jobs on single family and multi family. The line of credit option will allow up to 75% loan to value on land as either a 25% down payment purchase or a 75% cash out of available equity in land already owned. Here are more brief details about the line of credit product. This can be used for new construction and rehabilitation.
Key items you will need to know to qualify your Investor:
- Fico – highest mid fico of all borrowers within the entity.
- Liquidity – cash in business and personal checking/savings, stocks, bonds, ROTH IRA (90%).
- Net worth – equity in real estate + cash (needed for Exposure Limits over $4mm).
- Experience – how many flips and spec builds have you sold in the last 60 months where you were the seller on the closing statement (on Title)? How many current active rentals do you own that were purchased in the past 60 months?
Please know for Construction Financing:
- We fund 60% land acquisition without permits.
- We fund 75% land acquisition with permits in hand.
- We fund 90% hard costs to build (no soft costs which include but are not limited to plans, specs,permits, grading, soils testing, architect, engineering).
- We fund 75% LTV/ARV.
- We will fund the lower of the two land acquisition + hard costs to build.
Construction financing for Recourse is funded as follows: We will fund the acquisition to escrow. We will fund the hard costs to build to a 3rd party fund controlled account for you to draw against as you “complete” your build based off of each line item on your budge to You will call Granite which is the 3rd party inspector once you have completed portions of your budget and are ready for your inspection and release of some funds. Please note; you must have line item 100% completed in order to receive the 100% of that line item draw. Two Options for Interest Payments Interest only on approved Line of Credit interest rate on Full Note amount Interest only on Drawn Balance, Interest Rate plus adjustment (.25-1.25 add). You have 12 months to complete the spec build. You are eligible for two (2) three month extensions at a 1 point cost each upon review of your file. Please note you will fund your initial hard costs we will reimburse work completed.
Please know for Fix & Flip:
Rehab Fix & Flip Recourse. We fund up to 90% acquisition. We fund up to 90% rehab budget. We fund 75% LTV/ARV. We will fund the lower of the acquisition + rehab OR LTV/ARV whichever is lowest. You will call Granite which is the 3rd party inspector once you have completed portions of your budget and are ready for your inspection and release of some funds. Please note; you must have line item 100% completed in order to receive the 100% of that line item draw. Two Options for Interest Payments Interest only on approved Line of Credit interest rate on Full Note amount Interest only on Drawn Balance (borrowers with 3+ experience), Interest Rate from Line of Credit plus adjustment (.25-1.25 add) Please note you will fund your initial hard costs we will reimburse work completed.