New Home Construction Financing
Looking to build that dream home you always wanted?
RJ Baxter can help you with a One Time Close construction loan!
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Now offering construction financing for modular homes!
One Time Close
Program Overview
The One Time Close is a construction loan designed to provide financing to build a home or to renovate an existing home. The program is called a One Time Close because you only close once- at the beginning of the project. When the project is complete, the financing rolls over into a permanent loan with no need for a second closing.
How it works
Step 1: Find a lot to build on.
Step 2: Find a contractor/ builder who will build the home. The builder must be licensed and must be approved by the lender prior to beginning the project. Owner- builders are generally not allowed unless you are a licensed contractor.
Step 3: Builder submits plans for the construction phase.
Step 4: Builder and plans approved by the lender.
Step 5: Conference call with home buyer, builder, lender, and loan consultant, designed to explain the process and help everyone understand how to proceed.
Step 6: Land can be obtained as part of the One Time Close loan. If you already own the land, your equity in the land can serve as down payment.
Step 7: Your future home is appraised ”as completed.“ This value is used to determine the loan-to-value ratio (total amount borrowed vs. appraised value) upon completion of the project. In other words, if the appraiser determines that the home will be worth $250,000 when completed, but it’s only costing you $50,000 to acquire the lot and the builder is charging you $150,000 to build the home, your loan will be based on an 80% loan-to-value ratio. ($200,000 (cost of land + building home) / $250,000 (future value of home) = 80%).
Step 8: Construction begins. Builder obtains funds through draws throughout construction. Phases and draws are based upon the submitted plans.
Step 9: Depending on your feelings about the market and the advice of your loan consultant, you may lock your permanent interest rate and loan program at any time once construction begins. The lender allows a one time float-down option which will allow you to obtain a better rate within 60 days of completion of the project if the market improves. Your loan consultant can explain locking procedures in detail.
Step 10: Close on the permanent loan and move into your new home!
Benefits to the Home Buyer
Home buyer is billed for interest only on the amount drawn to date during construction and regular payments begin only after construction is complete.
Home buyer avoids the credit approval process when the home is completed, unless the program when the project is completed is different than the program originally approved.
Home buyer has the choice of using the floating option or the locked option for the construction term of the program.
Home buyer can finance up to 95% of the as completed appraised value.
Since there is only one closing, home buyer saves the costs associated with title and appraisal fees normally associated with two closings. If impounds are required (escrow account for taxes and insurance), these funds will be collected at completion of the project to set up the escrow account.
The loan can be paid down at completion to lower the payment or amount borrowed if the borrower chooses. Adequate funds must be verified.
Benefits to Builder
The loan is made to the buyer, so bank credit lines remain open.
Draw procedures are simple and help maintain cash flow during construction.
Any interest charge that is typically calculated in the sale price of the home becomes profit.
The loan is closed and funds for construction are immediately available. The home buyer and builder communicate draw requests with the lender throughout the process.
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