APPLICATION
The application package is the first step in the construction loan process. Once we have received an application, we will go over the information and call you (the client) to discuss what your goals and intentions are with the property and to determine which loan program best fits your situation. Once you have chosen your loan program, you will receive a Welcome Package with all of the disclosures for your loan and a short list of items which we will need from you in order to expedite the loan process.
PLANS AND DETAILS
You may or may not have plans picked out at this time, so this can be the one thing that might slow down the Construction Loan process. Once your plans are ready we will need to collect a copy in order to start the appraisal. Depending on the loan program you may only need the basic floor plan with elevations in order to do the appraisal and fund the loan OR, if required by your loan program, you may need to have your house plans approved by the City or County prior to funding your loan.
CONTRACOR OR OWNER/BUILDER FORMS
If you are building your home as an owner/builder you will, in some cases, need to sign a Site Supervision contract with someone qualified and experienced in residential construction. Your site supervisor, if not licensed, may need to fill out a resume showing their work history in order to qualify them as your supervisor. If you are hiring a contractor to build your home, we will need to get a copy of his General Contractor’s license, signed contract (with you) that has a fixed dollar amount, and a Builder’s Resume filled out and signed by the Contractor (this form will be provided for your contractor to fill out). In either case, we will need a Cost Breakdown (this form will be provided for you) which is basically a line item breakdown of all of your costs to build the home.
TITLE, ESCROW and APPRAISAL
At this point we have gathered or ordered most of the items we need to complete your loan package. While we are pounding away on your loan, you will not be required to do much except for sign a few documents. We will handle all of the details for you while we are waiting for the Title Report, Escrow Instructions and the Appraisal to be sent to our office.
LOAN APPROVAL
While it is true that we can pre-approve your loan, final approval will come after we have verified the information provided in your loan application. For example, in cases of Stated Income loans, we do not need to verify income, but we do need to verify employment, value of the property and in some cases cash reserves. Once we have collected all the information and packaged it up, it goes to the Loan Underwriter’s desk for approval. The Loan Underwriter can take up to 72 hours to review your package. Occasionally, this time can be longer if the house plans are sent to another Underwriter to do what is called “Costing Review”. If this happens, the cost breakdown which you or your builder provided is reviewed to ensure that you have enough money in your budget to build your home. Once the Underwriter has reviewed all the documents, there are usually a few additional items that the Loan Underwriter will want to see before giving us the approval we need in order to print loan docs.
DOCUMENTS AND FUNDING
Once we have sent in all of the outstanding conditions that the Loan Underwriter has asked for, we will have the loan docs printed and sent to Escrow to prepare the Estimated Closing Statement. You will then be contacted by the Escrow office to set a time to sign either at the Escrow office or at your home or office. You will be given a copy of the documents for your records at that time. Depending on the program, your loan will fund and record within 1-4 business days.
YOUR CONSTRUCTION LOAN DRAWS
Your first draw will be wired either to your contractors account or your personal account. Typically your first draw includes all of your soft costs and in some cases, up to 5% of your hard costs. Subsequent draws are based on percentage of completion of your project. For the required deposits on windows, cabinets, trusses, etc… you may need to send in a copy of your bid in order to get the deposit wired to your account. For most owner occupied loans, your loan is only charged interest on the amount that has been disbursed.
ADDITIONAL FAQs
Question: Do I need to make payments on my loan while my home is being built?
Answer: In most cases your loan will include an impound account to cover your monthly interest only payments. This impound account is called your “interest reserves account”. Your interest reserves account will typically have 12 months worth of payments financed into your loan amount. Once your interest reserves account reaches $0.00 you will be responsible for making any interest payments. In cases where you finish your home early, your loan amount will be credited back the total amount of unused interest.
Question: What if I don’t finish my home within the allotted amount of time?
Answer: Most of the programs available will allow you to extend a couple of months, but remember that you will most likely run out of interest reserves by this time and you will need to start making interest only payments on your loan. In some cases you will also be charged an extension fee, so make sure you keep your project on schedule.
Question: How good is Ocean Point Lending?
Answer: You are dealing with the best, most client oriented company when you decide to hire us to assist you in financing your home. :)
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