This product is second to none for all construction on single-family residences here in Las Vegas.  At this time, duplexes, triplexes and fourplexes do not qualify even if they are to be owner occupied.  The loan can be used for Conventional Owner Occupied and Second Homes as well as Jumbo Owner Occupied and Second Homes.  The loan is for pre-sold customers; no types of investment or spec property are included in this program.

The Savings:

Nearly all construction loans cost a 1-point origination fee, a credit report fee, an appraisal fee, a processing fee (usually about $250), inspection fees (about $300) plus escrow, a title policy, title endorsements and recording.  The interest rate for the construction is usually 2% over prime.  When the construction is completed, another title & escrow fee has to be charged plus regular loan take out fees.  With the ONE TIME CLOSE, there is only one loan and only one set of fees… THAT’S IT.   The interest rate for the construction period is at prime ONLY.  This makes for quite the savings.

Here are examples of the loan costs of a home with a Sales Price of $200,000.  The Customer chooses to put $20,000 down, leaving a Construction Loan and Take Out of $180,000.

A regular construction loan with a take out loan upon completion of construction:

The construction loan:

            Origination fee                             $1800

            Processing fee                              $ 250

            Appraisal & Credit                          $ 417

            Escrow & Title                              $1212

            Endorsements                               $ 400

            Construction Interest                    $2550  (based upon 2% over prime for 4 months)

            Inspections (4 @ $50 ea.)                $ 200

            Subtotal                                     $6829

The take out loan:

            Origination fee                             $1800

            Processing / Admin / Doc / Etc.      $ 845

            Reappraisal fee                             $ 100

            Credit Report                               $  67

            Escrow & Title                              $ 798

            Lock in Rate ** (optional)               $ 900**  (Rate locked same as capped rate of One Time Close except has no float down)

Total Cost of Regular Construction Loan    $11,339

**  If the borrower is allowed to lock in the rate for four months, the cost by most lenders is 1.5 points .  To compare apples with apples, by raising the rate .25%, which is the same as the capped rate on the 1 Time Close Construction Loan, the cost would be only .5 points, since rates generally cost .5% points per .125% to the rate.  (3 months added to 30 day rate = 1.5 pts – 1.0 for .25% rate increase = .5 points)

The 1 Time Close Construction loan:

            Origination fee                                         $1800    Capped at same rate as is locked in loan program above, but…

            Fee for locked rate w/ automatic float down      $2250    Can float down to lower rate if lower at completion of construction.          

            Appraisal & Credit                                                           $ 417

            Processing / Admin / Doc / Etc.                                       $ 845

            Escrow & Title                                                               $1212

            Endorsements                                                                $ 600

            Inspections (4 @ $50 ea.)                                                 $ 200

            Construction Interest                                                     $1950 (based upon interest at prime)

Total Cost of the 1 Time Close Construction Loan                  $9,274

Total Cost without float down option                                   $7,024

In this example, the savings are between $2,000.00 – $4,000.00 in fees and interest with our program.  The fees vary from bank to bank, but this should be a very typical scenario.  Still, there are more benefits than just the savings.

THE CUSTOMER IS QUALIFIED ONLY ONCE AND PRIOR TO CONSTRUCTION.  The builder no longer must worry about whether the customer will still have their down payment upon completion of construction.  The builder no longer must worry about the customer having changes in their work or debt that causes them to not qualify at the completion.  The builder no longer must worry about another builder down the street getting hold of this customer and offering to pay for the good faith deposit lost if they buy that builder’s house in lieu of the one being built.  Simply put, the customer can’t get cold feet once loan docs are signed and construction begins.

DISBURSEMENTS ARE MADE 3-5 DAYS AFTER THE INSPECTOR VERIFIES WORK COMPLETION.  The builder will be paid as quickly as he can build the house.  There are generally 4-6 disbursements made during the course of construction, although more disbursements can be set up on larger projects, less on smaller ones.  As each level of construction is completed, the builder has the inspector (who was the same person who did the appraisal) come out and verify the work.  Within 3-5 days of his verification, the funds are overnighted/wired to the builder.  It should be noted that the 1st disbursement will pay off the lot entirely as well as the building permit and the loan fees.   A real neat feature of this loan is that if the builder chooses to pay the sales agent early and documents on the line item “commission” the amount of commission to be paid to the sales agent, it can be paid at the beginning of construction rather than having to wait until the completion of construction.

LOCKED IN RATE DURING THE COURSE OF CONSTRUCTION.  Since the course of construction could be anywhere from 4-12 months, we take a large risk that rates could drastically change.  The rule of the lending industry is to offer extended lock ins at a cost of .50 points per 30 days beyond a 30 day lock.  This would mean that for a 4 month lock, it would cost a customer an additional 1.5 points.  In lieu of this, THE ONE TIME CLOSE reserves the money at the beginning and is built in to the initial rate, usually about .25 point higher then the daily rate. For example if today the going rate for a 30yr fixed mortgage is 5.5% than today’s rate for a one time close construction loan that would convert into a 30yr fixed would be 5.75%.

THE CUSTOMER CAN HAVE THEIR PRINCIPAL LOAN BALANCE REDUCED AND THE PAYMENT LOWERED AT THE NOTE OR FLOAT DOWN RATE.  Since some items in the cost breakdown are contingent upon choices made by the customer during the course of construction, there may be some funds left over they choose not to have included in their loan balance.  Also, some customers have homes for sale during the course of construction that they wish to have the net equity applied toward the balance of their new loan.  Under this program, they are allowed this adjustment one time.  Some customers may choose to wait on doing their loan adjustment up to 12 months after the loan is closed due to funds coming after the completion of construction.

THE CUSTOMER ENJOYS HAVING TO QUALIFY ONLY ONCE FOR THE LOAN.  Obviously the customer appreciates only having to chase down documentation once compared to the typical process.  In the typical process, the customer is qualified, the builder builds the home, then the lender requests documentation all over again to make sure the customer still qualifies.  With the ONE TIME CLOSE, having qualified at the beginning of construction, the customer can shop for new furniture, buy a new car, change jobs, whatever they choose because they are already approved and do not need to be approved again.

WHAT’S THE CATCH?   All the customers that we’ve explained this program to understand that there is the potential of the interest rate being .25% higher than the current going market, but no more.  That’s it, the only catch of this great program.  It has already been proven that the benefits far outweigh this minimal cost.  Recognizing what the catch is has actually helped us sell the program and given us absolute success in closing this program.  When loan docs are signed, they are drawn at the cap or max rate.  “The Catch” has been disclosed and everyone is happy.