SINGLE CLOSE CONSTRUCTION LOANS
There are many advantages to building your own home and a construction loan is required. It’s an excellent choice for homebuyers who are open to building from the ground up and creating their very own dream home.
When you decide to build your home, the most important decision is how to finance it.
One-time loans for construction are also known as:
- Single close loan
- Construction to Perm Loans
- One-time close loans
- construction conversion loans
- CTP loans
- You can even get “all-in-one loans”
Here are the facts.
What is a construction loan?
A construction loan is a short-term loan that can be used to finance the construction of a home, and then to transition to a longer term mortgage loan. Two loans are required for traditional new homes or stand-alone construction when the builder is not financing the construction.
Loan 1 A loan is required to finance the construction of the home.
Loan 2 Long-term financing requires a second loan.
These two processes can be completely different and may involve two different lenders and two different interest rate.
What is a single close construction loan?
A Single Close Construction to Permanent Loan is a home loan that can be used for both construction and permanent financing at the same time.
The Single Close Construction loan streamlines the entire process: One mortgage loan originator, one loan and one closing. This helps you save money, reduces the time it takes to move in your home, and protects against any unforeseen rises in interest rates.
Single Loans vs. Multiple Loans
Borrowers are often concerned about traditional construction loans. There are always two loans, one before construction starts and one after it finishes. This means that there is always the chance of circumstances changing and the second loan not closing as planned.
Sometimes new construction requires a third ” borrow” loan in order to prove that you can afford the project. This means higher fees, more paperwork and more risk.
This complicated process has led to thousands of people having difficulty obtaining financing or negotiating loan terms at a time when they should have been enjoying their dream home. This is why the one-time, close construction loan concept was created.
What are the benefits of a single close construction loan?
1. You only need to qualify once
Homebuyers repeatedly point out that loan qualification is the most difficult part of buying a home. So why should they do it twice? A Single Close Construction Loan allows you to be approved at the start of construction.
Single Close Construction loans guarantee that your loan terms will not expire and that all loan documents received will be current. This gives you peace of mind for big decisions.
2. Single Close Reduces Risk for Borrowers
A buyer could be required to qualify for home construction up to three times. A bad investment, a career change, or other cash flow issues could cause you to lose your home and everything you’ve put into it, even if you have a sound financial picture.
There is no risk with one-time construction loans. Once you have been approved, you’re in it for the long-term just like your new house. Transient changes in your financial status will not put you at risk of losing your home.
3. Fixed interest rates are a benefit
Variable interest rates on 30-year home loans can surprise you as they “balloon over time”. Fixed rates are offered by our one-time, close construction loans.
Fixed rates are the same throughout both the construction loan and permanent construction loan. There are no surprises. Many of our clients are eligible for attractive rates that simplify their lives.
4. Only one closing day is required
Multiple loans can mean multiple closings. Each one could cost thousands. Closing costs are typically between 3% and 5%. Nexa Mortgage makes closing simple and quick, which can help you save a lot of money. It is possible to save more or finance less on the purchase of your dream home.
5. You Get Single Appraisal Valuation
Appraisal valuation can be a major problem for both new and old homes. Your financing package could be at risk if the home’s appraised value is lower than you expected. Single Close Construction loans are not affected by this: Just one appraisal is required before the loan can be closed.
6. You Can Choose Your Build
Most mortgage programs are only for conventional construction. You have the choice of a stick-built, modular or manufactured home with Nexa Mortgage. No matter what shape your land takes, you can build your dream home. We can even help you with that.
Our clients have access to all these and many more benefits. Our clients are able to enjoy peace of mind after helping them buy homes across the country.
1. Builder Eligibility & Review
It is important to find a reliable builder in your locality.
- Nexa Mortgage has a few requirements for builders:
- Minimum of 3 years experience in building residential homes.
- Minimum volume of $1million annually
- They are primarily involved in the construction of residential homes.
2. Preparation of Contracts
After you have agreed on the parameters with your builder, a contract can be drawn up. It covers all aspects of the construction process. This includes timelines and how to handle cost overruns. The contract also outlines your responsibilities towards the builder.
Nexa Mortgage will work with you to assess your budget and help you determine the cost of building your home.
3. Signature of the Contract
After you have agreed on a purchase price and carefully reviewed the contract, you can sign it. Our construction underwriting team will review the finalized contract. It usually takes only a few working days to sign the contract and get all the documentation to each party.
A signed contract is required to start the loan approval process at Nexa Mortgage.
4. Project Review and Underwriting of the Loan
The loan will be reviewed for construction and sent to our underwriting department for approval. A financial institution assumes the financial risk in underwriting as part of larger transactions.
Nexa Mortgage provides financing for the construction process. We can also take action if the borrower is unable to meet their obligations or the builder fails to perform as expected.
Also, the credit package to finance the home’s long-term financing must be underwritten. This process is just like a normal loan. You will be required to provide your income and asset documentation for review. Our underwriting services are more efficient than most lenders. You don’t need to make a 20% downpayment, you can put as little as 5% down. 3.5% down with FHA and 0 Down with USDA.
5. Loan Closing
A final review of all financial information submitted by the borrower is part of the closing of the loan package. This includes documentation of income and liabilities. This is the easy part, everything is done except your signatures and collection of the final cash to close to cover your down payment and closing cost.
After the loan paperwork has been closed and signed, construction can begin on your new home.
6. Construction begins
Construction must begin within 30 days after the closing date. You will receive regular updates from your construction team about the progress of your house. Most homes take about a year to complete the process from breaking ground to moving in.
Nexa Mortgage will handle the construction phase, including ordering draw inspections and any state-required surveys and inspections.
Secure a One-Time Close Construction Loan
It is not easy to get a loan package for new home construction, but we make is as easy as possible compared to our competitors. Buyers will need to find financing for the land, construction, and home. They may be required to obtain a “takeout” loan to verify that they can pay for the entire project.
There are many moving parts in new home construction due to its complex nature. Re-qualifying is required for every buyer who needs to obtain a new loan package. They might also need to have the property appraised multiple times throughout the process.
Apply for a One-Time Close Construction Loan
Most homebuyers face the greatest hurdle in qualifying for a loan. But it is not as difficult as it seems. A one-time, close construction loan can be qualified in the same way as a conventional home loan. You’re likely familiar with the steps if you have ever purchased a property.
Not everyone can qualify for a construction loan. The amount of your loan will depend on your financial situation and risk level.
Available Single-Close Construction Loan Programs
If you select one of these government-backed home loans, your lender will need to follow certain rules regarding fees, interest rates, and how the funds may be used. This protects buyers from unfair loan practices.
These loans are not issued directly by the government, but by an approved lender.
Federally-backed loan programs allow buyers to purchase a home with little or no down payment.
All of our loan programs are available to finance new home construction. Buyers can also be helped by us to finance land if they don’t have enough to build on.
The following are some of our most requested loans:
a. Federal Housing Administration (FHA) Construction Loans
FHA Single-Close Construction loans were designed for buyers with low and moderate incomes and are particularly popular for people looking to buy a first home. These loans require lower down payments and credit scores than conventional loans.
b. Veterans Administration (VA), One-Time Close Construction Loans
A VA Single-Close loan is only available to eligible veterans and their surviving spouses. It allows you to buy, build, fix, maintain, retain, or modify a home. There is no down payment, closing costs are minimal, and there is no penalty for repaying the loan in full.
c. U.S. Department of Agriculture (USDA) Construction/Single-Close Loans
The USDA Single-Close loan is available in select rural and suburban areas. These 30-year fixed-rate mortgage loans don’t require a downpayment. Buyers can finance closing costs to reduce additional expenses.
d. Fannie Mae Construction Loan Programs
Fannie Mae, a government-sponsored company, guarantees loans. This allows lenders to extend loans to homebuyers with lower incomes and less risk. For fixed-rate loans that are applied to single-family homes, the Fannie Mae Single Close Construction loan program requires a minimum credit score 680.
Single-Close Construction Loan Rates
The rates of single-close construction loans may vary depending on many factors, including:
- Your credit score
- Type of loan
- Loan amount
Get in touch with the Richard Woodward Mortgage Team to learn more about your construction loan rates!
Locating a One-Time or Single Close Construction Lender
It is important to choose the right lender when considering a construction loan. To ensure the best possible experience, it is important to have a proven process and have experience. Our in-house experts can answer any questions about the construction process and the post-construction process.
Nexa Mortgage – Your Single Close Construction Loan
Nexa Mortgage is a simplified solution. They also have a well-vetted construction management team.
Our construction specialists review and approve all documentation at every stage of construction, drawing on their years of experience.
- Budget and timeframe for the project
- Specifications and planning
- Inspection and permits
- Building code best practices
Buyers often feel they are on their own when it comes to dealing with builders. If their builder fails to meet all requirements, they have very little bargaining power and limited resources.
Our team will keep your project moving forward as a Nexa Mortgage client. This prevents potential problems from becoming major delays.
Find and engage the builder you choose, as long as they are meeting our quality standards.
The builder vetting process reaches the core of what is important to you. All builders who are accepted into our program must have a track record of on-time completion of their home projects. Our top priorities are safety, quality, and efficiency.
You don’t have to worry about arranging inspections or applying for building permits as your construction progresses. All of it is done for you. All the documentation you may need in the future can be found in one location.
The Nexa Mortgage One Time Close Construction Loan Advantage
Nexa Mortgage developed a unique one time close construction loan process. This was done by bringing all the necessary expertise together.
Your one-time, close construction loan can be obtained as a conventional loan or as part of any of the popular government-backed loan programs, including FHA, VA, and USDA.
The Loan Lifecycle
The one-time close construction loan allows you to receive both the interim loan and the permanent 30-year loan simultaneously. This means that you will receive one promissory note as well as one deed of trust. At closing, you sign the 30-year amortizing promissory notes.
Any liens on the land that are not paid by the promissory notes will be immediately removed once the note has been signed. The builder will receive a draw amount so construction can begin immediately. Once the project is completed, you will receive a modification to your loan that will change the date for the first payment.
The 30-year amortizing loan functions as any other home loan after the loan modification has been signed. Fixed interest rates ensure that there will be no surprises during the entire process of repaying your loan. You will be able to live in your dream home as you envisioned it.
The friendly team at Nexa Mortgage will take care of most of the details for you. You only need to be open to discussing your requirements with your builder and to carefully read the contracts at every stage. We are always here to help!
FAQs about Single Close Construction Loans
1. Is a down payment required for a single close construction loan?
The loan program you choose will determine if you require a down payment. Traditional construction loans require a 20-35% down payment.
Our one-time closing programs offer down payments ranging from 0% to 3.5% to a maximum 20%. This is a fraction of what most banks usually ask for.
2. Is there a minimum credit score required for a single close construction loan?
Your credit score is only one of the factors that will determine how much you are able to finance your one-time, close construction loan. A credit score of 700 and above is considered low-risk, while scores between 800 and 850 are exceptional. However, even the most wealthy people don’t always have this score.
A minimum credit score of at least 640 is required for our one-time construction program. We will review your financial situation and work with you in order to find the right loan solution for your needs. Your current income and investments are heavily weighed.
3. What are my options?
For most of our products, the first payment is not due until construction is completed, however, you can elect to make interest-only payments as well.
4. What are the Closing Costs of Closing?
Closing costs can vary depending on your loan amount and your personal situation. You should assume 3-6% of your project budget.
5. What is the average time it takes to build a house?
New home construction should be completed in 12 months. Our in-house construction management team takes care of every step to ensure that the project is completed on time. The builder’s final performance is ultimately up to them and unexpected circumstances may occur. Project length is affected by the type of home, its size, and the builder’s schedule.
6. Can I do any construction work myself?
7. Can I get a loan to purchase an investment property?
8. I don’t own land, can I still get a loan?
Yes. Yes. Your land purchase can be included in your one-time transaction.
9. Can my Land be a Gift?
Yes. To use the appraised value of your land, you must have it for at least six months.
10. Is it possible to tear down an existing home and build a new one?
Some loan types allow for rebuilds or teardowns. Talk to your loan officer about what you need in order to get the right information for your loan type.