Construction Loans And Consumer Protection
This definition is important, because non-bank entities have become more common in the construction loan space over the years, and now the federal government is stepping up efforts to hold these companies accountable should they run afoul of the law.
In December 2022, the Consumer Financial Protection Bureau (CFPB) announced a proposed rule that could enhance protections for those who want to build a home.
Under the CFPB proposed rule, “non-bank entities” would be required to disclose court judgments against them to the CFPB, which would add those items to a publicly available database.
This allows the consumer to make a more informed choice about a non-bank company they might be thinking of applying with for a One-Time Close loan.
As you might have guessed at the start of this article, there are some nuances at work. Some reading this might assume that the CFPB’s additional scrutiny on non-bank entities would extend to appraisers, inspectors, and other third parties. Is this true?
The Consumer Financial Protection Bureau seems focused on a type of lender, not a third-party service provider, at least for the purpose of this proposed rule.
What do non-banks do? A non-bank entity may offer credit, real estate services, or act as a go-between for transmitting money. They may act like a lender in a variety of ways, but do not function as a bank in terms of savings accounts, checking, etc.
Under the current version of the proposed rule, each non-bank entity would be required to have a senior official responsible for informing the federal government of that entity’s compliance with federal law. And any non-bank with a ruling or judgment against it would be required to report that to CFPB.
This is an issue of transparency, or at least added transparency.
But you don’t have this protection yet, which is to be determined at a later date. The CFPB published its proposed rule on this issue for a 60-day public comment period. Once that public comment period ends, the proposed rule gets a review.
CFPB may decide to set a “final rule” and put the entire proposal into a formal regulation. Or CFPB may modify the proposed rule, reopen the comment period, and try again. Or it may choose to drop the matter entirely depending on the results of the public commentary.
This added scrutiny on non-bank lenders can only help consumers interested in using such information when deciding on a construction loan.
But in the meantime you can still protect yourself even without the rule--it pays to shop around for a construction lender. Compare costs, interest rates, and other expenses between five or more lenders and see where the most competitive options are.
Want More Information About One-Time Close Loans?
We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs.
We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service.
If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher-quality service.
We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allow for single-family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).
In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
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Please send your email request to [email protected] which authorizes OneTimeClose.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639), or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you is an eligible veteran, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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February 2, 2024Are you unsure if a One-Time Close construction loan is the right choice in 2024? Building is better than buying for some, and if you feel that describes you, there are some steps to take when looking for the right VA or FHA single-close lender, especially if you are considering a conventional version of the loan. Comparison shop, and know your options before you commit to a specific lender.
February 1, 2024There is a FHA / VA government backed One-Time Close construction to permanent loan program available in Illinois for qualified applicants who are looking to build a brand-new home versus a resale. Due to local housing shortages, this is a great time to consider building your dream home.
January 25, 2024Do your mortgage loan options seem confusing? Home loan types and the application of those home loans have their own time frames and cost considerations. You'll want to know the details of each option and decide whether you're right for building or buying existing real estate. Building and renovating typically cost a bit more than buying an existing home. For those not in a hurry, the options below each have their own advantages.