From Construction Phase to Move-In Day
You've closed on your One-Time Close Loan, and it's time for construction on your new home to begin! Your lender will start to disburse "draws" to your contractor over time as the building progresses.
Draw Disbursement
With a Single Close loan, payments are made to the builder on a work-completed basis. Draw requests must be submitted by the builder, along with an itemized report of the progress made on the home. An additional assessment comes from an independent, third-party inspection service that determines the percentage of work completed. Once these reports are received by the lender and the draw amount determined, the disbursements are made to your builder. Some lenders may flow the funds through the closing/escrow agent, while others may disburse directly to the builder.
It Begins With the Start-up Draw
A start-up draw might be paid to your contractor after closing is finalized. This includes the lot payoff amount, less any down payment. Your builder receives the final draw once the project is completed. Lenders may require additional documentation before making this last payment, such as a final appraisal inspection, an endorsement from the Title Company, and proof of the homeowner's insurance policy.
Construction Period
Whether it's FHA or VA, most lenders don't want to see the construction period on your new home exceed 9 months. Every home is different, which means that this timeframe can vary according to the location and type of home. Our lenders have provided average construction periods for the different, one-unit homes financed via One-Time Close loans:
- Site-Built homes -- 280 days average
- Modular homes -- 240 days average
- Manufactured homes -- 200 days average
Amortization and Move-In
During the interim construction period—however long it may be—you are typically not required to make payments on the loan or pay the construction interest. Your builder is responsible for the interest during the construction period, which is an incentive to finish building as quickly as possible. Payments are normally due once the project is complete, all required documents have been provided by your builder to the lender, and the construction portion of the loan converts to the permanent portion of the loan. Your permanent mortgage begins amortization no later than the first of the month following 60 days from the issuance of the certificate of occupancy by the local municipality or final compliance inspection, whichever comes later. No re-qualifying, no increase to your interest rate, and no additional closing costs!
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October 11, 2022There are a variety of home loans that can be used for a variety of purposes. Getting the right loan is an important part of the journey toward home ownership. Did you know the loan used to build a home from the ground up is not the same as the one you use to buy an existing property with? You would not apply for a loan to buy an existing home in the suburbs when you want to build one from the ground up. The process is quite different.
October 6, 2022When you build a home with a One-Time Close mortgage, a down payment and closing cost payments are required, the same as any other mortgage. When it comes to these expenses, some borrowers might assume you just hand the lender a check and call it a day, but there are rules to know about closing costs and down payments on your single-close construction loan that make a big difference when it's time to plan and save for the loan.
October 4, 2022How should you prepare for a construction mortgage? It can take time to prepare your finances and credit for any kind of loan application, and One-Time Close construction loans typically require some extra time to plan and save. This is why you should start preparing as early as possible.
