Home Financing from Start to Finish using USDA Loans
Construction to Permanent Loans saves you on Closing Costs
Loan Processing Information Saves you Time and Money
You Can Build Your Home with Financing from Start to Finish: It is much more enjoyable to choose fixtures and cabinets than to study financial and legal documents. Construction to permanent loans allow you to have more time to focus on your dream home. The process is easier than most may think.
Here is a breakdown of how the loan process works:
Construction to permanent loans have some qualifications. Your home must be owner occupied as a primary or secondary residence. The property must also be a single family, one unit detached home. USDA Loans Direct requires you to utilize a licensed builder in constructing your home.
Understanding Loan Options
Once you are ready to begin your loan application process, contact an expert at USDA Loans Direct so we can walk you through the loan process, interest rates and loan terms available to you. Our loan products offer fixed and adjustable rates along with interest only loan types. Our experts can assist you in determining the loan type best suited for your personal needs.
Completing an Application
The process of completing your application isn’t much different than applying for a regular loan. Along with your financial information, the following will also be needed:
- Your construction agreement completed with your builder which specifies the total cost of your home along with the lot value and any upgrades.
- A land contract, if applicable, will be necessary.
- Your façade of the house and any floor plans will also be needed.
- Any deed to lot will need to be provided.
Loan application decisions are typically available within 48 hours upon completing your paperwork. Your loan representative will draft you a completed loan document which will outline all of the details of your loan. This document will be received at closing and you will receive a copy for review in advance.
Meeting Your Closing Requirements
At the time of closing, it’s necessary that you have sufficient cash to cover all closing costs as well as your down payment requirement. If you own the lot already, USDA Loans Direct may consider your equity that is acquired in your property as a means of meeting your down payment necessary requirements. Should your home site need a well or septic tank, we will require site tests before the actual loan closing.
Obtaining Homeowners Insurance
Before you take the first draw on your loan, it is important you provide USDA Loans Direct a copy of your 12 month prepaid homeowner insurance policy. This will need to include any “builders risk coverage.” This type coverage will protect you from any financial responsibility for any damage that may occur such as liability or theft while your home is in the construction phase.
How to Begin Drawing on Your Loan
Once your down payment has been exhausted, this is the time when you can begin to draw funds from your loan so that you can pay your construction costs. Interest payments will not need to be made until you start using your loan funds. Construction phase payments are interest only and the amount is calculated depending on outstanding loan balance.
Managing Cost Overruns on Your Loan
Homeowners may make upgrades or modifications to loans and this is not common. When this happens with the construction of your home there may be cause cost increases which result from any given changes. It’s nice to keep in mind that your loan amount can have a reduction prior to any modification to your permanent loan but the amount may not be increased.
How to Pay for Home Inspections
USDA Loans Direct will require four to six inspections of your home during initial construction phase. These inspection costs can be covered by appropriate funds disbursed as predetermined arrangement that is agreed with your builder.
How You Can Modify Your Permanent Mortgage
After the construction phase has concluded, USDA Loans Direct will receive your final completion certificate along with the occupy permit from your local governing jurisdiction. When we perform the final inspection, we will then modify your loan into a permanent mortgage that you have chosen.
Establishing Your Escrow Account
Real estate taxes and insurance that are involved in escrow accounts are established after completion of your home and after modification of the loan being transformed to a permanent loan. All insurance and tax payments will be your responsibility during the entire phase of construction. When the construction loan has any modification involving your permanent mortgage, you are then responsible for any reserves necessary in establishment of your escrow account.