Bring your vision to life with a Single Program!
For some, the ideal home exists only in our imagination. Why not make yours a reality with a Single Construction-to-Permanent Loan Program designed to cover home construction costs by dispensing money in “draws” at progressive stages of completion
WHAT IS A SINGLE CONSTRUCTION TO PERMANENT LOAN?
A Single Construction to Permanent (SCTP) loan is a home mortgage that can be used by the borrower to close both the construction loan and permanent financing of a new home at the same time. They are sometimes referred to as “construction to perm”, “single close”, “one time close”, “construction conversion,” or even “all in one” loans.
HOW DOES A SINGLE-CLOSE CONSTRUCTION TO PERMANENT LOAN WORK?
The one thing that all these SCTP variations have in common, is that a SCTP offers both the interim construction loan and the permanent 30 year loan under one Promissory Note and One Deed of Trust with a single loan closing.
The borrower will sign the 30-year amortizing promissory note at the closing and at the same time sign a modification agreement to that note. This agreement modifies the note from an amortizing to an interest-only note, with interest due only on that amount that the Lender has actually disbursed in accordance with a Construction Loan Agreement, based on the stage of construction.
REASONS TO CONSIDER CONSTRUCTION TO PERMANENT LOAN
1. YOU ONLY NEED TO QUALIFY ONCE
Gathering up all of qualification documents such as, pay stubs, W2’s, tax returns, bank statements, photo IDs, and signing loan disclosures is both time consuming, confusing, and inefficient for your borrowers. A traditional two-time close loan requires that a borrower qualify not two times, but oddly enough three times – Once for the construction loan; once for the permanent “take-out” loan to prove that they can pay off the construction loan; and then, again a year later when the house is actually complete because now the original documents and approval have all expired! A SCTP loan only requires that you go through the process one time and one time only!
2. FIXED INTEREST RATES
With a SCTP loan the interest rate during construction is pre-determined AND the interest rate of the permanent loan that the construction loan will convert to is also pre-determined when the borrower closes the loan.
3. REDUCED CLOSING COSTS
Mortgage loan closing costs can be a significant expense to the borrower, usually 3% to 4 % of the loan amount. Closing one loan instead of two loans can save you thousands of dollars. This savings can then be better spent on things like landscaping, furnishings, window coverings, utility deposits, etc., usually not included in the cost of construction.
4. SINGLE APPRAISAL VALUATION ELIMINATES SURPRISES
Two-Time Close loans are usually going to require two separate appraisals, by separate appraisers, both paid for by the borrower. The first is done for the construction loan and the second done for the “take-out” loan when the house has been completed, usually around a year later.
The maximum loan amount is determined by calculating the loan to value ratio (i.e., divide the loan amount by the value and you will get the loan to value.) If the second appraisal comes in at a value less than the original, then the borrower will have to make up the difference in cash – a big surprise! A SCTP loan usually only requires one appraisal prior to closing the SCTP loan. This means no surprises when the house is completed.
• Available in Conventional and High Balance loan amounts
• Up to 95% LTV financing
• As low as 680
• Permanent financing terms include 15, 20, 25 and 30 year
• 2-in-1 Loan with single closing for the interim construction financing and the permanent financing
• Up to $484,350 for Conforming Loan Limits
• Up to $726,525 for High Balance Amounts
• Interest-only payments during construction on funds already disbursed
• Builder acceptance process made easy—no financial information required
• Take advantage of a 12-month construction period
• Flexible draw schedule
• Build a primary residence or secondary home
• Ability to purchase a lot, or build on property already owned