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Conforming and Jumbo Construction Loans. 10% Down, 6% Seller Closing Credit Allowed

Yes you can build your own home as little as 10% down!

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Conforming Construction Loans Program Guidelines

Loan Purpose

  • Finance Construction Costs
  • Purchase a lot
  • Land can be currently owned, including:
    • Recently purchased
    • Owned Free and Clear
    • With a current mortgage

Credit Score and Maximum Loan Limit

PRIMARY RESIDENCE – CONSTRUCTION/CONSTRUCTION-TO-PERM
LOAN LIMITS MAXIMUM LTV MINIMUM CREDIT SCORE Maximum Loan Amount
Conforming Loan Limits ≤ 90.00% 720 $453,100
≤ 70.00% 700
High Balance Loan Limits ≤ 90.00% 720 County Specific. Click Here to Search
Jumbo Loan Limits ≤ 85.00% 760 $1,000,000
≤ 80.00% 720 $1,500,000
≤ 70.00% 720 $2,500,000
SECOND HOME - CONSTRUCTION/CONSTRUCTION-TO-PERM
Jumbo Loan Limits ≤ 75.00% 720 $1,000,000
≤ 70.00% 720 $1,500,000
≤ 65.00% 720 $2,000,000
≤ 50.00% 720 $2,500,000

Credit Profile

  • Credit score as determined by above matrix (no exceptions)
  • Desktop Underwriting findings must be "Approve/Eligible" for Conforming and High Balance Loan limits and “Approve/Ineligible” for Jumbo Loan limits
  • Waiting period after a major negative credit event:
    Conventional Loan Type BK – Chapter 7 BK – Chapter 13 Discharged BK – Chapter 13 Dismissal Foreclosure* Short Sale, Deed-In-Lieu, Pre-Foreclosure* Modified Mortgage*
    Standard 4 years 2 years 4 years 7 years 4 years 2 years
    With Extenuating Circumstance 2 years 2 years 5 years 3 years (requires 10% down) 2 years No waiting period

* If a property was included AND surrendered (i.e. property wasn’t retained and the debt wasn't reaffirmed) in a Chapter 7 Bankruptcy, the borrower may potentially be able to defer to the Chapter 7 waiting period Vs. the Foreclosure waiting period.

Reserves

  • For Conforming and High Balances Loan limits the reserve requirements are based on Desktop underwriting findings
  • Jumbo Loan reserve requirements are as follows:
    Occupancy Loan Amount Required Reserves
    Primary Residence Up to $1,000,000 9 months
    $1,000,000 to $1,500,000 21 months
    $1,500,000 to $2,000,000 27 months
    $2,000,000 to $2,500,000 30 months
    Second Home Up to $1,000,000 15 months
    $1,000,000 to $1,500,000 21 months
    $1,500,000 to $2,000,000 27 months
    $2,000,000 to $2,500,000 39 months

Construction Timeframe

  • Construction timeframe will be assessed on a case-by-case basis based on a typical construction time for the scope of the project, construction type, time of the year, and location of the property
  • Maximum construction time-frame is as follows:
    • Conforming loan limit: 12 months
    • High Balance loan limit: 12 months
    • Jumbo loan limit: 24 months
  • Construction can start immediately after closing
  • During the construction period borrower only makes interest only payments

Draws

  • The initial draw at closing will cover upfront costs; including payoff the lot, building permit, architectural fee
  • Draw amount will be based on inspections and percentage of completion
  • The quantity of allowable draws are based on the loan amount (see below)
  • Final draw is paid after the Certificate of Completion or Occupancy is issued

OTC Administrative Fees, Draws, and Construction Interest

  • The lender will use a third-party Draw Administrator to perform a builder review, project review, and act as a draw administrator. The number of draws and fees charged by the Draw Administrator will vary as follows:
    ≤ $200,000 $200,000 - $453,100 $453,101 – $650,000 $650,001 – $1,000,000 $1,000,001 – $2,500,000
    Construction Draw Fee $1,400 $1,750 $2,650 $3,650 55 bps
    Incl. Number of Draws 3 Draws 5 Draws 7 Draws 10 Draws 12 Draws
    Additional Draws $265 $265 $275 $295 $350
    Final Inspection $175 $175 $175 $175 $175
    Final Title $175 $175 $175 $175 $175
    Title Updates/Endorsements Based on title quote from Settlement Agent
    Survey $750
  • Interim Construction Interest Rate*
    • To determine the Construction Interest Rate, use the locked interest rate and add the following:
      Construction Term Rate Adjustment
      6 Months .50%
      9 Months .625%
      12 Months .75%
      18 Months 1.00%
      24 Months 1.25%

* This is not the permanent interest rate of the borrower’s loan. It is the interim interest rate accruing during the construction period. The borrower is responsible for making the interest only payments, only on the amount drawn, during the construction period

Builder/Retailer Responsibility

  • The builder/Retailer must act as the only General Contractor ("GC") on the project
  • GC can't be related to the borrower(s) or an employee/employer of the borrower
  • GC must be insured, licensed, and bonded

Loan Amount

  • See above chart under "Credit Score and Maximum Loan Limit"

Mortgage Insurance Premiums

  • All loans above 80% Loan-To-Value (LTV) require mortgage insurance coverage according to the following guidelines:
    MORTGAGE INSURANCE PREMIUMS
    LTV 30-Year 15-Year
    85.01 – 90% 25% 12%
    80.01 – 85% 12% 6%

Ratios

  • As determined by Automated Underwriting System or AUS. Requires a Desktop Underwriter "Approve/Eligible" or "Approve/Ineligible" findings
  • Manual underwrite not accepted on the Conforming OTC program

Property Type

  • Eligible:
    • One-unit properties only
    • Stick Built Housing
    • Modular Homes
    • Detached site condominiums
    • Rural Properties
    • Tear-downs & major renovations (eligible with 12-month construction period only)
  • Ineligible:
    • Manufactured Housing
    • 2-4 unit properties
    • Properties where construction has already begun
    • Lots in excess of 10 acres
    • Log homes

Occupancy

  • Owner occupied
  • Second homes
  • Ineligible – non-occupant co-borrowers/co-signers

Documentation

  • All loans must be fully documented per Agency Guidelines
  • For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)

Down Payment/Closing Costs

  • For Down Payment amount, see above chart under "Credit Score and Maximum Loan Limit", based on the combined purchase price of the land and construction costs
  • If already own land, the down payment can come from equity in the land
  • Seller and Builder contribution toward buyers closing costs and escrows up to 6%
  • For Conforming and High Balance Loans, down payment and closing cost help may be gifted
  • For Jumbo Loans minimum 10% down required from borrower’s own source of funds

Terms

  • Amortization period: 15 and 30-year fixed rate