Financing

THE FINANCING PROCESS – THE CONSTRUCTION/PERM LOAN

A Construction/Perm Loan is designed exclusively for new construction. Although at first glance it is a slightly more complex mortgage loan than the traditional loan, but with a brief explanation, it is easily understood and a straightforward process.

Unless you are planning to pay cash for your home, the first step is to meet with one of our preferred lenders and complete a mortgage application. For your benefit, it is important for you to complete the mortgage application within 5 days from the date you sign the contract. It will take approximately a week for you to be pre-approved. It is very important not to delay this process as delays in financing may delay the start of your new home.

For your convenience, we have compiled a list of preferred lenders. They provide a high level of service and care that we feel our customers deserve. There are many advantages and conveniences when using one of our preferred lenders. They are familiar with our homes and the appraisal process. They also have a history of efficiency and customer satisfaction. Feel free to contact them prior to starting the building process with us.

Please allow a reasonable amount of time for your loan application meeting (1-2 hours) since there will be a great deal of material that will be discussed and presented. A loan application is a complicated task. However, the loan representative is familiar with the process and will guide you carefully along the way. Ask questions if there is any information presented to you that you do not understand.

You will be asked to sign some forms and disclosure statements. Before you sign anything, be sure you fully understand the various terms and options of your proposed mortgage. This includes, but is not limited to interest rates, fixed rates vs. variable rates and discount points.

The following is an overview of a typical Construction/Perm Loan:

A Construction/Perm Loan closes before the actual construction of your home begins. The permitting process and construction will take place after the initial closing

All down payments are given at or before the construction loan closing, per your contract.

The construction lender distributes the "funds" to the building contractor in "draw" payments. These "draws" are distributed according to the percentage of work completed on your home

The construction lender periodically inspects and certifies all work performed by the building contractor before the issuance of "draw" payments

THE FINANCING PROCESS – THE CONSTRUCTION/PERM LOAN

There are no fixed monthly mortgage payments made to the lender during construction

The only payments made by you during construction are the interest payments based on the amount "drawn" to date on the construction loan. This amount is usually paid monthly

The interest rate is set by the construction lender during the construction period and is usually based on the current prime interest rate. This in no way affects your "permanent" interest rate

The "permanent" interest rate is usually "locked-in" as the house nears completion

The "Modification" or the 2nd. Closing simply converts the construction loan into the permanent loan in which the familiar monthly mortgage payments are made. The rate and payments are solely based on the permanent loan condition. (i.e. a 30 year fixed rate mortgage)

Before the "Modification" or 2nd. Closing, all bank and building inspections are completed and the buyer’s new home Orientation/ customer Walk-Through has been done

At the time of the "Modification" Closing, your home has been completed, a C.O (Certificate of Occupancy) has been received and the keys are given to you and it is time to move in.