Here are the current details regarding construction loans.

As you know rates have been constantly changing, so be aware of these rate lock details …

1. The interest rate is locked when the Loan Estimate goes out and is good for 60 days.
2. If you increase your loan amount after the initial rate lock your rate will be adjusted to the rate at the time of the loan increase, so it is advisable to increase your initial loan amount by $40k, 80k or $120k and then lower your loan amount once the budget gets worked out.
3. The 60 days has been extended in a few cases as long as the loan amount does not increase from the initial loan estimate but should not be counted on.
4. We need an application to register and send out loan estimate, this takes 5-10 days.

For the owner builder construction loan there are 3 options …

1. 8.5% 31 year combined 1 year construction loan with 30 year permanent loan, this one is fixed for first 6 years, 700 high FICO needed. APR 8.9%. APR is not the true rate, but it factors in loan costs in the rate for comparison purposes spanned over the life of the loan.
2. 8.5% 12 month adjustable rate construction loan that can be extended for 6 months for around $1000, 680 FICO can use highest FICO score. APR 13.2%
3. 8.0% 5 year loan that combined construction with permanent loan, this one has a 0.5% higher lender fee, is fixed for first 5 years, it is a fixed for 5 years, is a balloon loan which means you need to refinance or pay it off in 5 years, is on the slow side with underwriting, 750 high FICO and strong financials needed to qualify.

Current refinance rates on a finished house are 6.1% and 6.6% depending on loan size above/below $770,000**    APR is 6.4% and 6.9%.

** other things like credit score, debt to income ratio, lender point or lender credit,  and loan amount to appraised value can affect the rate or lender credit.

For the Traditional builder construction loan there are 2 options …

1. 7.5% 31 year combined 1 year construction loan with 30 year permanent loan, this one is fixed for first 31 years, 640 high FICO needed. FICOs under 740 have rate adjustments. APR 7.9%
2. 6.75% with a 5pts of discount fee (a lot of money) 31 year combined 1 year construction loan with 30 year permanent loan, this one is fixed for first 31 years, 640 high FICO needed. FICOs under 740 have rate adjustments. APR 7.05%

Here are the main features of owner builder loan options …

1. Max loan is 90% of the appraised value or 90% of the cost (whichever is lower, usually the cost is lower).
2. 43% max debt-to-income.
3. Requires loan committee approval.
4. There is no prepayment penalty.
5. You will most likely want to refinance once the house is completed, if you want us to check this for you, we can do permanent loans.
6. Will allow owner builder – need a builder of record .
7. Requires plans, budget, contract, land or land contract, and the typical mortgage documents.
8. Appraisals take approx. 6 weeks – closing usually occurs 3 weeks after appraisal/budget/contract is complete and loan is preapproved.
9. Best time to start you application if you are sure you will be approved is 2 weeks before plans have floor plan and 4 elevations.

Traditional Builder loans … Same features as owner builder loans with these exceptions…

1. Can go up to 49% DTI
2. Will not allow owner builder
3. You will not be as likely to refinance unless rates drop.
4. Has higher draw fees  ($1000-4000 depending on # of draws and loan amount)
5. You can “pick your interest rate” but the rate selected affects discount points fees or lender credits

Here are the main features of the owner builder 31 year combined construction loan…

1. 31 year loan that combines the following…
1. 12 months construction – can be extended 2-12 months (extensions have costs).
2. 30 year permanent loan
2. Interest rate for option 1
1. Monthly interest payments start in construction when money is drawn from the loan.
2. Interest only on amount of loan drawn during year 1 in construction.
3. Fixed for 1 year of construction and the first 5 years after the house is completed (so it is an adjustable rate loan after 6 years).
4. Adjusts every 3 years starting in year 7 (0.5% above the wall street journal prime rate).
5. APR is not the true rate, but it factors in loan costs in the rate for comparison purposes spanned over the life of the loan.
3. Interest rate for option 3
1. Monthly interest payments start in construction when money is drawn from the loan.
2. Interest only on amount of loan drawn during construction.
3. 5 year balloon loan so after 5 years you need to pay off the loan or refinance back into another 5 years or a 15/30 year fixed loan.
4. We can save you a few thousand in fees if you refinance before you modify into the permanent loan.