- Construction Loans -
Construction to Permanent Loan
Often, getting approved for a construction loan
can be tricky. In many cases, two loans are
required - one for construction and one for
permanent financing. Usually you will have to
pay closing costs on both loans, not to mention
the extra paperwork, time and hassle involved.
But we offer a single-close
Construction-to-Permanent Loan that combines
both construction and permanent financing into
Our Construction-to-Permanent Loan allows for a
construction period of 6 to12 months. Other
options are also available. And when your
project is complete, the loan simply converts to
a permanent mortgage.
Construction Loans FAQ
Q. Besides obtaining a Construction to Permanent
loan, what other costs may be associated with
the construction of my home?
A. In addition to the contract price, it is
common for a construction lender to build a
contingency reserve into the loan. This is a
specified percentage or dollar amount usually
required by the lender in case of unforeseen
circumstances that could negatively impact the
construction of your home. The amount required
is usually based on a percentage of the contract
price, on-site costs or loan amount.
Additional costs will vary, and may include
construction loan closing costs and fees and
special insurance requirements. Our
Construction-to-Permanent Loan includes on-site
costs, off-site costs, closing costs, interest
reserve, contingency reserve and lot purchase or
Q. What does the term "cost plus" mean? If I
contract for work to be done, doesn't it
automatically mean that everything is covered?
A. Not always. Some contracts are referred to as
"cost plus" because they guarantee the price
only for the contractor's supervision of the job
and may exclude a portion of the costs for
materials and labor. Other contractors may cover
both labor and materials but include a clause
that permits the contractor to charge more if
there are material shortage or increases in
costs. You will want to clearly define with your
contractor what is covered and is not covered.
Q. When will I have to make loan payments?
A. Our Construction-to-Permanent Loan program
includes an interest reserve, which means that
you will not have any payments out of pocket
during the construction period. We will
incorporate an interest reserve account within
the loan amount. Depending on how quickly you
use your construction funds, there may be
sufficient funds within the construction loan to
carry you through the entire construction
period. As each construction project is unique,
you will need to discuss your options with your
Construction Loan Specialist.
Q. Will the payments on my construction loan
include principal and interest?
A. Not necessarily. You may have interest only
payments until the house is completed. This
means that interest is charged only on the
amount of funds used. Interest on our
Construction-to-Permanent Loan is charged based
on the funds used. Payments are interest only
during the construction period, converting to
principal and interest payments upon completion
of the home.
Q. What will my construction lender need in
order to review my loan request?
A. You are asking the lender to loan money on
your dream. Your lender will need to see that
dream as clearly as you do. Therefore, in
addition to standard credit documentation, your
lender will want, at a minimum, copies of the
following documents to start the process:
1. Final plans and specifications. These are
needed in order to obtain an appraisal.
2. Purchase contract for the lot (or Settlement
Statement if you've already purchased it)
3. Property profile (description of materials)
4. Line Item Cost Breakdown from the builder
5. Builder's construction contract
6. Copy of Builder's license
7. Builder's statement or application
For more information regarding
Loans please call us at
on the web.
We offer Lot/Land loans with as little as 10%
Our Lot Loan is the right loan if you are
looking to purchase a residential lot for future
construction of a primary residence or second
home. Once you have purchased the land, you will
have time to design your new home and choose a
contractor. As described above we also offer a
Construction-to-Permanent Loan when you are
ready to build.
Lot/Land Loans FAQ
Q. I've found the perfect location, but I'm not
ready to build my dream home. Can I obtain
financing for the land only?
A. Yes, you can obtain a Lot Loan. Typically,
this is short-term financing for the purchase of
a residential lot suited for future
construction. This loan allows you time to
select an architect, builder, and design your
dream home. Our Lot Loan program allows you to
finance up to 50 acres. And when you're ready to
build, we offer a one-time close
Q. How do I know where I should build my home?
A. Location may be one of the most important
factors to consider. Although many people have a
geographic location in mind, some are open to
alternatives. It's important to consider your
lifestyle (and those you'll be living with) as
well as the cost. If you're planning a family,
schools will be important. If not, you may want
to consider other factors such as proximity to
work, or accessibility to the beach, the
mountains or leisure activities.
Q. What is a "finished lot"?
A. A "finished lot" refers to a portion of land
that already has road access and utilities in
place to the lot boundary. Additionally, it has
been approved by the city or county as a
separate parcel of land on a parcel map.
Q. Can I buy a piece of land that is not a
finished lot and save some money?
A. While it may be possible to purchase an
unfinished lot, generally this is not advisable
for an individual building their own home. The
costs of bringing roads and utilities to the
first lot in a new area are usually very high.
Typically, the first person to build pays for
others who will build later. There are land
developers who specialize in preparing lots for
building (this may include zoning and/or soils
issues, as well as bringing roads and utilities
to the site, and creating a building pad).
Often, these lots are in a planned community.
Q. What do you mean by "planned community"?
Aren't all communities planned?
A. No, many older communities were not planned;
they evolved. Certainly, as a city has grown,
plans have taken shape. But in many cases the
nucleus of a community was started many years
before the community or city planning existed.
In many instances, it is this unplanned
characteristic that gives a community its charm.
A planned community, in contrast, generally
offers a specific style and certain amenities at
a package price. Depending on the size and
location of the community, these amenities may
include greenbelts, landscaping, biking trials,
swimming pools, even schools and shopping
centers. Some amenities, such as the community
pool and greenbelts, are paid for through a
homeowners' association. Still others are design
enhancements intended to encourage potential
buyers to purchase in an area or to attract more
Many of the more costly amenities included in a
planned community may not be affordable for a
homeowner on an individual basis. However, some
of these amenities may not be important to you.
After all, priorities, like lifestyle, vary. If
you select a home in a planned community, you'll
generally have a more structured community where
decisions are made jointly rather than by the
individual homeowner. These community decisions
include individual home design and landscaping.
While some homeowners may consider this an
acceptable trade-off to ensure an attractive
environment, others may consider it an
infringement on their rights. It's important
that you know how you feel before selecting the
type of lot you want.
Q. Can tax bases differ within the same
A. Yes, they can. While some cities already have
parks, schools, and streets, newer communities
built within the same city may have special
assessments that cover the costs to develop or
maintain new or existing parks, schools,
streets, etc. These assessments may be for a
prescribed period of time or may continue
indefinitely. A little research goes a long way.
Here again, a good real estate agent or title
company officer can often provide you with this
For more information regarding Lot/Land Loans
please call us at
on the web.