If you don’t want to pay for things you don’t want in a home but are willing to pay for items that are important to you, building your own home might be the solution!
My most recent Example. 4 years ago, my dad lived in Arizona. We asked my mom to live with us and we were able to build a 1600ft2 home on our lot. During construction she took me and my wife’s bedroom, and my wife and I moved into the attic. 18 months later she moved her stuff into her new home, and everything was great.
It was a stick-built home and had everything she needed. This allowed her to be close to any special needs she might have and has worked out perfectly. Perfectly in that I don’t have to fly to Arizona for Christmas morning nor worry about her.
Example #2. I am currently doing a loan for a past client. He owns 12 acres with a 50-year-old mobile home on the property. He owes about $180,000 and the build will cost $430,000. He is tearing down the mobile and replacing it with a modular home that is nice. In the last 2 weeks we have approved the builder, gotten the contract corrected to meet the loan guidelines, and are now in underwriting. Overall, this will take a total of 5 months to complete, 2 months for permits and 2-3 for the construction.
This is a OTC (One Time Close) loan meaning initially is structured like a construction loan, which provide draws for the builder. These draws help pay at different phases of the work being done. Phase 1 might cover ground prep and the foundation and phase 2 might be framing and rough plumbing, electrical. Once the construction is complete the loan converts to a normal 30 year fixed loan.
OTC has the benefit of not having to incur the costs of 2 loans nor having to qualify 6 months later. Rates, guidelines and the borrower’s financial situation may be different in 18 months and we want to avid that
Here are the steps for a construction loan (OTC)
- Family wants to build a home
- Call your loan officer and get pre-approved
- Find land
- Find builder and give your loan officer (LO) the contact information of the builder
- LO will submit builder to be approved and them registered with the lender.
- Family designs the home with the builder to determine costs
- LO completes a calculation questionnaire to determine construction acquisition cost and budget
- Purchase price is established, and the purchase contract is update
- LO registers loan with lender and disclosures are sent out
- Loan is sent to setup then underwriting
- Approval is issued, family gets a mortgage for the home and docs are sent to title.
- Docs signed and keys given!
Here are some particulars…
FHA –
- Max LTV 96.5
- 620 Min. FICO
- Eligible property types:
- Site-Build
- Mobile Home-Single wide
- Double Wide modular
- Barndominium
- Borrower paid construction interest – optional
USDA –
- Max LTV 100%
- Min. Fico 640
- Eligible property types:
- Site-Build
- Mobile Home-Single wide
- Double Wide modular
- Borrower paid construction interest – no
VA
- Max LTV 100 – not including VA Funding Fee
- 620 Min. FICO
- Eligible property types:
- Site-Build
- Mobile Home-Single wide
- Double Wide modular
- Barndominium
- Borrower paid construction interest – no
Conventional
- Max LTV 95 – with FICO 700 for Fannie Mae
- Max LTV 95 – for Freddie Mac
- Max LTV 97 – with FICO 720 for ChoiceHome
- 620 Min. FICO
- Eligible property types:
- Mobile Home-Single wide
- MH Advantage
- Double Wide modular
- Barndominium
- ChoiceHome
- Borrower paid construction interest – required
The best way to navigate this is to have a seasoned loan officer show you what he/she thinks is the best solution and then compare that to what you have/need. I can say that for every construction deal I have closed, it has been a good thing.
Casey Knowles
Ticket Mortgage Inc.
Read more :- https://ticketmortgage.com/
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