ONE-TIME CLOSE FINANCING
Main Street Builders, in cooperation with Advisor's Mortgage, LLC, offers a convenient, streamlined and low cost one-time close procedure to finance the construction of your home.
A description of the financing process follows. The details of this financing will also be explained to you in detail during the initial pre-construction process and all of your questions answered. Of course, you are free to finance the construction in any manner you choose through any lender you choose.
In past years the builder or buyer would obtain a construction loan to fund the acquisition of the land and construction of the home as it was being built. A series of closing costs would be incurred to facilitate the financing. When the home was complete, end financing would be placed on the house and another set of closing costs would be paid. This inefficient way of financing home construction essentially double dipped the closing expenses resulting in a higher cost to the buyer.
The one-time close method of financing avoids the duplication of closing costs. A construction loan is initiated based on the amount of financing that will be needed. Generally, the amount is determined by calculating the amount of end mortgage. The construction is closed up-front and funds the lot purchase and the construction of the home. Interest on the construction is paid only on the amount drawn. When the home is complete, the construction is converted to permanent terms by modifying the terms of the construction loan to the terms of the permanent loan. The rate on the permanent portion of the loan will be determined when the borrower locks into a rate. The rate can be locked in at any time during the construction process commensurate with the completion of the home and conversion to permanent financing. Extended lock-in premiums and deposits apply.
A brief description of the financing process follows:
The down payment amount will be determined based on the borrower's resources and price of the home. The down payment is generally brought in at the up-front close, but other arrangement can be considered depending on individual circumstances and credit criteria.
The borrower will be billed monthly for the accrued interest on the amount actually drawn.
The borrower decides when to lock in the permanent financing rate. The rate for the permanent financing can be locked in at anytime throughout the construction process. The rate-lock period must extend through the completion of the construction and conversion to permanent financing. Advisor's Mortgage, LLC will guide the borrower through the lock-in process by watching the current market and market trends and advising the borrower to help determine the right time to lock.
Advisor's Mortgage, LLC, working with the borrower and main street builders, builds in some variance for change orders and subsequent price changes. In some cases the loan amount can be modified up or down depending on final investor placement. Oftentimes subordinate financing may be brought in or adjusted to compensate for necessary adjustments.
The borrower will submit required documents early in the planning process to obtain pre-approval for the financing. Main street builders will submit the following documents to the lender three weeks prior to the anticipated start date of construction:
- Purchase Agreement for the house and the lot
- Specifications for the house
- Set of blue prints for the house
- Survey or plat drawing
- Sworn construction statement
Upon receipt of these documents, Advisor's Mortgage, LLC will meet with the borrower to finalize the mortgage application and process the loan. The loan will then close with the Title Company. At the time of closing the lot will be purchased, closing costs paid and any initial draws taken. Title and ownership of the property will be held in the borrower's name. Construction can commence any time after that.
From time to time Main Street Builders will submit a draw request to the title company. The title company will contact the lender to receive the funds. The borrower will approve and sign off on all draw requests. The Title Company will ensure that all lien waivers are gathered and remit funds directly to the subcontractors and builder.
The final close where the construction loan is converted to permanent financing occurs with the title company. All change orders and final price numbers are submitted to the lender in advance, generally two weeks prior to the scheduled closing date, to ensure all numbers are correct. A final spreadsheet is constructed and submitted to the borrower for approval.
Advisor's Mortgage, LLC works closely with the borrower and main street builders to ensure a smooth and seamless process.