Our Construction Loan basic guidelines are significantly different than other places. We offer fixed rate, 30 year loans, many of our competitors only offer 15 year or Adjustable Mortgages. We will allow you to put as little as 10% into the transaction, most of our Construction Loan competition requires at least twice that amount to build on your own land. You don’t HAVE to build on your own lot, we can add the amount of the lot to the over all loan, some of our competition for a Construction Loan require you to already own the land.
Construction Loan Policy
The construction loan program will be offered on an ARM or 30, 15, or 20 year fixed rate loan to borrowers. The loan will be locked-up front and good through the completion date of the project. The Construction loan will then modify into the borrower’s long-term mortgage (at the same rate the loan was originally locked at.)
A full “as built” appraisal is required during the initial Construction loan application process “subject to” completion.
We prefer to provide construction financing in sub-divisions, however, we will consider rural locations on a case-by-case basis.
Borrower Loan Requirements:
3 to 6 months of Principal, Interest, Taxes and Insurance (PIT) reserves are required. This is factored based upon the borrower’s credit score.
- 680-719 credit score does not require 6 months PITI reserves (liquid.)
- 720 + credit score does require 3 months PITI reserves (liquid.)
- Ration requirements 28/36% (preferred) up to 44% with AUS approval
- No “self builds” are permitted.
- No pre-work may be done prior to the loan closing
Maximum Loan to Value (LTV)
- For Owner occupied properties
- 680 + 90% LTV
- 680-719 credit score must have 6 month’s reserves (liquid) to be eligible for 90% (maximum) LTV financing
- 720+ credit score must have 3 month’s reserves (liquid) to be eligible for 90% (maximum) LTV financing
- 680 + 90% LTV
- Second/Vacation Homes –
- 680-719 to 80% LTV
- 680-719 credit score must have 6 month’s reserves (liquid) to be eligible for 80% maximum LTV financing
- 720+ credit score must have 6 months reserves (liquid) to be eligible for 85% maximum LTV financing
- 680-719 to 80% LTV
Maximum Number of Properties Owned by Borrower:
- The borrower may own a maximum of 2 homes
- We will make an exception and permit no more than 3 homes owned IF the borrower owns a second/vacation home.
- Owner occupied and second homes (vacation homes) are permitted with the Construction Loan Program.
- A second home or vacation home must be a “reasonable distance” from the borrower’s existing distance. Typically a second home/vacation property that has a minimum of 100 miles away from the borrower’s residences is considered acceptable. This is subject to the discretion and review of the underwriter as well.
We will NOT permit:
- Investment Properties
- Attached PUD’s
Permanent Loan: The construction loan on a new home will modify into the permanent long-term mortgage upon the completion of the project. The loan is “one-time closing” The borrower will sign additional documents to modify to permanent financing.
- Title: At the time of closing the closing attorney must provide an up to date ALTA title policy and ensure that we are in 1st and best lien position.
- Foundation Survey Fees:
- It is the sole responsibility of the borrower to work with the title company and/or vendors to assess the correction foundation survey fees. If the foundation survey fees are being held by Equity Resources, Inc. and are incorrect, Equity Resources will reimburse any overages directly back to the borrower. We will also bill the borrower for any shortages relative to the foundation survey. If the title company/closing attorney is holding the foundation survey fees, it is the responsibility for the title company/closing attorney to reimburse any overages or to cover any shortages with the survey. The title company/closing attorney will also be responsible for including the foundation surveyor’s name and telephone number on the closing documents.
- Please be cognizant if an exception is granted for a Construction Loan being done on a rural property. The cost for the survey may be higher, depending on the size of the land.
If Someone Else is Making your Mortgage Payment Now:
We routinely run into situations where a Grad Student was put on a mortgage with their parents during college Fannie Mae just came out with the following guidelines about counting that mortgage, that you are not paying, against you. We can exclude the full Payment from the borrowers Debt To Income ratios if we can meet the requirements listed below.
When a borrower is obligated on a mortgage debt – but is not the party who is actually repaying the debt – we may exclude the full monthly housing expense (PITIA) from the borrower’s recurring monthly obligations if:
– the party making the payments is obligated on the mortgage debt,
– there are no delinquencies in the most recent 12 months, and
– the borrower is not using rental income from the applicable property to qualify.
To exclude this debt from the borrower’s DTI, we must obtain the most recent 12 months’ cancelled checks (or bank statements) from the other party making the payments, showing no delinquencies. Also, when a borrower is obligated on a mortgage debt, regardless of whether or not the other party is making the monthly mortgage payments, the referenced property must be included in the count of financed properties.
If you are looking for today’s best mortgage rate on a Construction Loan or for a New Home in North Carolina – Call Steve and Eleanor Thorne 919-649-5058 .