New, Better Construction Loans in Gainesville!
We, here at Landmark Mortgage Planners, are extremely excited to add our new series of One-Time-Close Construction to Perm Loans to our mortgage line up. These new products are extremely competitive in terms and pricing, while eradicating a lot of the major roadblocks and risks associated with the standard two-closing construction loan process. In addition, our new VA & FHA options open up construction opportunities to those lacking a large down payment.
Problems with Traditional Construction Loans
There are some risks usually associated with the construction loan process that are completely eliminated or at least majorly reduced with Landmark’s One Time Close Construction Loans. Usually, a short term construction loan is attained during the time of construction. Typically, interest payments are made during the building period, and when construction is complete a new long term loan package is put together and submitted for underwriting. This new loan must be closed before the owner can take ownership of the property. One of the biggest disadvantages to this traditional construction loan approach is that the borrower is typically required to make interest payments on the temporary (short term) loan while also paying to live somewhere else, and this is after draining their savings for the down payment. Beyond this inconvenience, there’s several other risks associated with this old-case scenario. The largest risk is that the borrower’s credit position might change during the construction period and the final construction loan could be declined, leaving the borrower without a new home and with a lot of disappointment. There are so many things that can happen in nine months including job changes (such as downsizing, lost overtime, and layoffs), interest rate increases, new debt (which might include new purchases or even unexpected debt like hospital or doctor bills), changes in minimum payments, old credit problems that resurface, changes in underwriting guidelines, a decline in home values, and even standard inquiries on your credit could lower your credit score or increase your debt ratio. Any one of these can cause a rejection on that permanent second loan. Even if the if the second loan is approved, along with having a second set of closing costs, it could take weeks to get the package to closing after construction is complete.
Landmark Mortgage has a better way!
Advantages of One-Time-Close Construction Loans
Significantly Lower Risk: Our process consist of only one loan that is approved and closed one time. This means there is no chance you could build your dream home and end up not qualifying for the permanent loan.
Lower Costs: With one loan, comes only one set of closing costs (many of which can be built into the new loan or paid by your builder). This makes our new construction loan a lot less expensive.
Lower Down Payment: We have FHA and VA construction loan options available with the same benefits as our conventional construction loan, but with a much lower down payment. Since the recent mortgage and real estate crisis, typical construction loans require a 30-40% down. But our FHA construction loans only require 3.5% of the entire project for a down payment, and our VA construction loans require no down payment at all!
More Flexible Underwriting: Because we have construction options now backed by VA & FHA, our underwriters can afford to be more flexible in their underwriting. We can now get approvals for individuals with credit scores as low as 620 if 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, on our VA construction loans we can go up to 41% of your total income for a housing debt.
Landmark’s Construction Loan Process
Getting pre-approved for one of our construction loan programs is the very first step. The best way to do that is to get an appointment scheduled with one of our construction specialists. They will tell you how much you can spend on your new home, what documentation you will need, what questions to ask your builder and what your monthly payment will be.
Next, you need to meet with a builder and discuss your dream home and get a cost to build. We realize this is the most exciting part, but it is vital 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:
- What is your max cost to build?
- 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?
You will need a piece of land to build on but it is NOT NECESSARY TO OWN A LOT prior to beginning your project because we can include the purchase of land right in your loan. We will just need a purchase agreement for the land in order to begin your construction loan. If you already own land or have a relative that wants to gift you a piece of land, we can often use the equity in the land for all or a portion of your down payment!
Once you are pre-approved for your construction loan, have determined the location for your new home, and obtain a cost to build from your builder, then we can custom design your construction loan and start the loan process. We will need to obtain a certified appraisal that will be based on the builder’s home specifications constructed on your land. Our new construction loans are processed and underwritten with criteria similar to a normal mortgage loan, and once your loan is approved we will close at a title company. If you are purchasing your land as part of the package, it will be paid in full from the proceeds at the closing of your new construction loan.
After the closing, the builder can begin construction using funds from the new loan through a series of draws. There will be inspections throughout the process to insure the builder is completing your new home according the original specifications and in line with current building codes. Because there are often modifications made during the construction process, we will automatically build in an extra 5% for unexpected costs and changes. We are also able to build in a “fund” to make the interest payments on the borrowed amount during construction process so you don’t have to. This way you are not financially pressured by having to make 2 payments at the same time.
Once your home is completed and a certificate of occupancy is issued, we will then finalize your loan. The new loan will be for the total amount drawn and accumulated (in interest payments), and will be amortized over 30 years (or other period approved on your loan). This finalization process does not require a new loan application or approval, a new closing, or a 2nd set of closings costs – because it is not a new loan – we are just finalizing the original one! And, you can move in right away and begin enjoying your dream home.
So, why wait? Right now is the very BEST TIME to build your dream home – interest rates are still low, local builders are making great deals, and now Landmark has a construction loan program that eliminates all of the road blocks to make your dream a reality.
Contact Landmark Mortgage Planners today to schedule an appointment with one of our construction loan specialists today!