Build on Your Lot - Single Close Construction Loan
YOU WANT TO BUILD A CUSTOM HOME?
This section is a valuable resource for anyone planning to build a custom home. It provides information on the financing process, a helpful glossary and a timeline to help you plan your project. How you finance the construction of your new home is one of the most important things to consider. Our perferred lenders are leaders in home construction lending, specializing in Single Close Construction Loans. They are well known for our exceptional customer service, and they understand the needs of both the you as the home buyer and us as your builder. Our perferred lenders Single Close Construction Loan takes you from groundbreaking to move-in, in one easy process. If you decide to work with one of our lenders, you will be working with construction loan specialists who are able to answer all of our questions so that your home construction keeps moving smoothly with no surprises along the way.
A LOAN PROGRAM TO MEET YOUR NEEDS – THE SINGLE CLOSE LOAN
We offier through our lenders a Single Close Loan designed to build a primary residence. Single Close means one loan – start to finish. You sign one set of loan documents that covers both the interim construction phase and the permanent loan. This eliminates the need for multiple loans to get into your new home. With a single loan, you can purchase the land for your home and complete the construction. When construction is complete, the loan converts to a permanent mortgage loan saving considerable time and money. The construction period is normally up to 12 months to allow time to build the new home and sell the existing home.
WHAT MAKES UP THE CONSTRUCTION LOAN COSTS?
There are a number of costs that go into building a new home:
You may purchase the land you have under contract at closing with proceeds from the Single Close Loan, or you may have already purchased the land and have a loan to be paid off with proceeds from the Single Close Loan. Or, you may own the land free and clear.
Permit fees, engineering fees, architectural fees and other costs associated with building the home, but not directly part of the actual construction costs.
The tangible costs associated with the actual construction of the home. This includes materials and labor costs.
Sums included in the construction budget for items to be selected in the future, such as flooring, cabinetry.
A Contingency Account is recommended on all contracts to cover change orders or upgrades. Differences between budget allowances and actual costs are usually handled through change orders.
The total cost consists of all of the above.
MAXIMUM LOAN AMOUNT
You may borrow up to the maximum loan amount as figured from the lesser of the appraised value or the actual cost (lot plus construction costs).
The difference between the appraised land value and the loan to be paid off on the land, if any, will be the lot equity. The lot equity will be a credit toward the required down payment, if any.
HOW DOES THE CONSTRUCTION LOAN PROCESS WORK?
The Single Close Loan process is very similar to a standard purchase or refinance transaction. But unlike a purchase transaction for an existing home, the Single Close Loan involves determining the value of a home that is not yet completed. To assist the appraiser and the lender in determining future value, information must be provided on the planned home, such as what materials will be used and the total cost to complete the project.
FINAL PLANS AND SPECIFICATIONS
These consist of a legible set of architectural drawings (building plans). They must include a floor plan showing all dimensions and outside elevations (drawings of the exterior). In addition, CRV Homes will provide a detailed description of the materials to be used in construction of the home; for example, wood shingle or lightweight tile roofing; brick or stucco exterior. This information will be provided to the appraiser who will determine value, subject to completion per plans and specifications.
This is the agreement between you and CRV Homes that details the planned construction project, the agreed upon cost and the construction term to complete the project. The final plans and specifications should be an attachment to the construction contract.
DETAILED LINE ITEM COST BREAKDOWN/DRAW SCHEDULE
This schedule is prepared by CRV Homes and includes all costs associated with the construction. The total will match the Construction Contract total. The Draw Schedule is used to advance funds to the builder as work is completed.
This form requires information that is supplied by CRV Homes and is used solely for the benefit of the lending company to determine eligibility for their program. Selection of the builder is the exclusive, independent decision of the borrower but CRV Homes is already registered as a qualified builder with many lenders.
HOW ARE DRAWS DISBURSED FROM MY CONSTRUCTION LOAN?
Draw disbursements or progress payments are made on a work-completed basis and occur over a period of time as the work progresses. CRV Homes will submit draw requests directly to the lender, itemizing the work completed and the amount requested for payment. The percentage of work completed is determined by an independent third-party inspection service. CRV Homes will designate a construction bank account at a financial institution and disbursements will be wired directly to that account after receipt of the inspection report. As a convenience to you, a copy of the disbursement statement may be sent to you either via email or regular mail each time CRV Homes makes a draw. This statement indicates the amount of funds disbursed and funds remaining on the project.
The initial disbursement at closing includes the payoff of the lot (if applicable) less your down payment (Initial Cash Deposit to CRV Homes). Also, a startup draw may be disbursed immediately after closing is finalized to get the construction process moving forward.
The cost for special order items may be funded up to 50% of the line item on the draw schedule, when accompanied by a request from CRV Homes together with supporting invoices.
The final draw to the CRV Homes will be paid upon completion of construction and receipt by the lender of a final appraisal inspection, a “clear endorsement” from the title company, a final survey if required, homeowner’s insurance policy, and any other documentation as may be required for your particular loan.
CONSTRUCTION TIME LINE
1. SITE SELECTION
If you have not already selected and purchased your lot, location is one of the most important factors to consider. There are realtors who specialize in finished lots as well as developers who sell finished lots. Many builders also have lots in inventory. A current survey of the property indicating all easements and rights of way will be required for closing.
2. PLANNING MEETING WITH CRV HOMES AND ARCHITECT
Building the custom home begins several months before you break ground. You may start by meeting with CRV Homes or your own architect. CRV Homes has architects on staff at no addeitional charge to you. Keep in mind that each plays an integral role in the process and will work together to help make your vision a reality.
3. MEET WITH THE LENDER
It’s never too early to meet with your construction lender. A construction lending specialist can help in planning for your future investment. If you need assistance with this - please let us know.
4. LOAN CLOSING
You must have an adequate down payment or equity at the time of closing. Equity is defined as cash paid toward the lot or construction costs, both hard and soft.
5. UP TO 12 MONTH CONSTRUCTION PHASE
Enjoy a construction phase of up to 12 months with interest-only payments or fully deferred payments while CRV Homes completes your new home. You will be charged interest only on the funds disbursed. The interest-only construction phase of your financing may continue past your home’s completion and your move-in, up to 12 months from loan closing for most loans.
6. MOVE IN!
Once construction is complete you may move in. If your home is completed early you may opt to continue making interest-only payments through the end of the construction period or you may modify your loan to begin making permanent loan payments for most loan programs.
TAKE UP TO 12 MONTHS TO SELL OR LEASE YOUR CURRENT HOME!
If you currently own a home, you do not have to sell it before you start a new one. Close on the Single Close Loan and have up to 12 months to sell or lease your current home prior to loan modification. No need to move twice!
The Single Close Loans normally allows for modification options, which is available upon completion of construction of your home, or up to 12 months after loan closing.