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Residential Construction Loans

Today's modern day construction loan is usually a one-time close, one set of loan fees construction to perm or permanent loan. The construction loan includes the construction loan period and long term financing to build a dream home in California. 

Construction Lending Features:

  • Lot Loans
  • Construction
  • Demo & Rebuild
  • Remodel
  • Rehabilitation

Lot loans up to $1,000,000

Construction financing to $5,000,000 standard and up to $10,000,000 for High Net Worth individuals.

Lock permanent loan up-front for up to 24 months on Fixed and ARM loan products.

Construction Loan Highlights

Construction Loan Overview
Single close construction to permanent financing.

Purpose of Construction Loans
Purchase, finance and cash-out refinance

Products/Pricing
Construction phase: Interest only based on the amount disbursed. Permanent phase: Lock First allows the permanent financing to be locked prior to beginning construction. 

Processes
Modified/Standard (Full Doc)

Occupancy
Primary residence, second home, investment (rental) property.

Property Type
New construction, remodel or rehabilitation of:  Single family residences, 1 to 4 units.

Construction Loan Terms
Construction phase (months) 12, 15, 18 and 24.

Interest Rates
All lenders offer different rates and programs depending on your qualifications and loan size.

Contingency Reserves
Required and or Optionnal depending on the lender, standard. 5% on Ground Up and Non-Structural Rehabs. 10% on remodels. Can be waived under certain circumstances.

Owner/Builder
By exception only. Owner/Builder requires a licensed contractor as a project manager. Specific requirements apply throughout the construction phase regarding the Project Manager's responsibilities. Most lenders allow an a licensed contractor to be an Owner Builder.

Draw Allowance:
Construction term: <=6 mos.: 5draws, 9mos.: 9 draws, 12 to 15 mos.: 14 draws, >=18mos.: 18 draws. Additional draws can be purchased for $150/each

Appraisals
For loan amounts greater than $1,500,000, 2 appraisals are required. Appraiser must be on the lender approved list.

Special Construction Reserves
Transition Ratio
6 months PITI - conditions apply
Waive Financed Interest Reserve

Pre-Closing Asset Accounting
In addition to brokerage accounts, retirement accounts, bank account balances, etc., recent (within 24 mos.) payment toward lot purchase, and prepaid expenses for hard and soft costs related to the project can be considered as pre-closing pre-paids towards equity down payment (if properly documented with receipts and cancelled checks).

Modified/Standard (Full Document)

Purchase and Rate/Term Finance

Primary LTV Loan Amount FICO
  80% $1,000,000 680
  80% $2,000,000 720
  75% $2,000,000 680
  70% $3,000,000 and above 60 to 70%

Credit Score and Qualifying Ratio Requirements

Conforming FICO Max Ratio
Salaried >=700 50.00%
Self-Employed >=700 40.00%

Preferred Documentation Features

Salaried (two year work history required)
1 YTD pay stub (most recent computer generated), 1 W-2 Form (for most recent year)

Self-Employed (Borrower owned for 2 years minimum)
1 year 1040 (pages 1 & 2 only of most recent year), Sched. A required for commissioned income.
Required: Business Returns, K-1s, Balance Sheet, P&L.

Bonus/Overtime
Same as Salaried. Average of YTD & w-2

Other Income Sources

Reserves
Purchase: 6 to 12 months PITI. Refinance: None. Subject to additional construction reserves requirements (i.e. Transitional, Contingency & Interest Reserves)