Frequently Asked Questions
Q. What is a Construction to Permanent Loan?
A. Construction to Permanent loan is a loan used to finance the construction of a home. Upon completion of the build, the loan converts into a permanent loan. In most situations requalification is not necessary.
Q. I currently have a loan balance on my home/lot. Do I have to carry this payment and the construction to permanent payment?
A. No. Construction to Permanent loans will pay off your current loan. Normally, this type of financing allows only one loan in first lien position. This encompasses both your current loan, if any, and the loan necessary to complete your build.
Q. Are my payments during construction based on the entire loan?
A. Monthly Payments during construction are Interest only and are calculated off the outstanding balance of the loan. As funds are requested and the outstanding loan balance grows, payments will increase.
Q. Who handles the funds during construction?
A. Funds during construction can be handled by either the owner or builder. It is up to the homeowner to discuss with their selected contractor who will manage funds to ensure the build progresses without delay.
Q. What is my down payment requirement?
A. Down payment is based on a few different factors and each transaction will vary. Generally speaking, if you own your home/lot, your loan will be based on the future completed value of your home and may not require a down payment. If you do not own your home/lot or the area in which you are seeking to build does not warrant high enough value to borrow against, a down payment may be required.
Example – Home/Lot is owned:
$260,000 – Current Loan on Home/Lot
$500,000 – Cost to Build/Renovate
$950,000 – Future Completed Value
$760,000 – Loan Amount 80% LTV
NO ADDITIONAL DOWN PAYMENT REQUIRED
OTHER THAN MISCELLANEOUS CLOSING COSTS
Example – Home/Lot is not owned:
$260,000 – Home/Lot purchase price
$500,000 – Cost to Build/Renovate
$760,000 – Loan to Cost/Value
$608,000 – Loan Amount (20% down payment)
$684,000 – Loan Amount (10% down payment)
PAYMENT REQUIRED IN ADDITION TO
MISCELLANEOUS CLOSING COSTS
Q. In what states is financing available?
A. Financing available in the following states: Arizona, California, Colorado, Texas, Florida. Properties located in the following states may be considered on an exception basis: Nevada, Oregon, and Washington.
Q: Can a condominium qualify for Jumbo loan financing?
A: Yes, a condominium is an eligible property for most Jumbo type financing. Single Family (attached/detached), Condominiums, Planned Unit Developments, 1-4 multi-family are the most common types of properties that would qualify for this type of financing.
Q: What are my options to get obtain a Jumbo loan with 10% percent down?
A: There are several loan structures that may be available in order to achieve the best and most advantageous payment/rate for the applicant. For example some options may include one loan with a straight 10% down payment (90% Loan to Value), two loans with 80% First and 10% Second referred to as an 80/10/10. Generally the lower the Loan to Value to value will secure the best rate available. Factors like credit score, reserves, debt service ratio, all play into what an applicant could potentially qualify for.
Q: What loan programs are available, Fixed Rate/Adjustable Rate?
A: Both Fixed and Adjustable Rate mortgages are available. There are also Interest Only options available at some lenders.
Q: Do Jumbo loans have a penalty for off the loan early?
A: Generally there are no pre-payment penalties for paying off a loan early when securing traditional Jumbo type financing. Private/hard money financing may be subject to pre-payment fee, double check terms noted in your loan agreement to see if this applies to your situation.
Q: How long does it take to get pre-approved?
A: Pre-approval generally takes 48-72hrs once proper documentation has been provided to validate an applicant’s ability to qualify. Pre-qualification can take less time, generally 30-45mins, as a “Pre-Qualification” does not require supporting documents to be provided. The overall loan process once a property has been identified and an offer has been accepted or is currently owned takes anywhere from 30 to 60 days processing depending on the type of financing you are seeking (Purchase, Refinancing or Construction to Permanent).