Conforming OTC Construction Loan Overview

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Conforming One-Time-Close/OTC/Single Close Construction Loan Program Benefits

The Conforming and Jumbo OTC Construction Loan program allows well qualified eligible borrowers to create one loan amount, to purchase a lot, provide interim construction financing, wrapped into one permanent loan with as little as a 10% down payment
Loans with a loan-to-value less than 70% will not need to requalify for a permanent loan, upon completion of the construction phase of the project
Minimum 10% down required, with gift funds allowed for non-jumbo construction projects
Safe, secure 30 Year fixed rate mortgage
With Builder/Retailer closing cost help, up to 6% of the construction costs, minimizing out-of-pocket closing costs
Tear-down and major renovation construction projects are eligible (12-month renovation time-frame allowed)
Most property types allowed

Conforming Construction Loan Qualification Requirements

Constructions must be completed within 12 months for a conforming loan limit and 24 months for a jumbo loan limit
A third-party Conforming Approved Builder must be selected for the project
All borrowers on the loan must have a minimum 700 middle credit score for a conforming loan limit and 720 middle credit score for a jumbo loan limit
Subordinate financing not allowed
No manual Underwrite. Loan approval level must be an:
- Approve/Eligible for Conforming and High Balance Loan limits
- Approve/Ineligible for Jumbo Loan limits, with a maximum debt-to-income ratio of 40%

Everyone Wins with a Conforming One-Time-Close Loan:

Borrowers:
- With a Conforming OTC Loan, unlike a traditional two-step construction loan, the borrower doesn’t need to re-qualify for the “take-out” loan upon completion of the construction
- With a typical two-time construction loan, the borrower must qualify for the construction loan, the take-out loan, and when the home is almost completed as the original borrower documentation and credit reports have expired
- With a Conforming OTC Loan, unlike a traditional Construction-To-Perm loan, borrowers eliminate the cost of refinancing their interim financing loan
- Interest rate is locked prior to the loan closing, for the life of the loan; thus, eliminating interest rate risk
- During the construction process the borrower is only responsible for making interest only payments on the loan, which has an interest rate as low as .50% over the note rate
- The loan is fully in place prior to construction
- Upon completion of the construction project the loan is modified to a fully amortized principal and interest payment over 15 or 30 years
Contractors, Builders, Retailers:
- Obtain the security of knowing that the borrower’s permanent loan will not only be approved, but is closed on prior to starting construction
- The Builder/Retailer can obtain staged funded draws without having to draw on their own credit lines, thus eliminating their interest costs
- Based on the scope of the project builders can obtain between 3 to 12 draws during the construction process
- Builders no longer use their credit lines to fund a construction project

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