Residential Construction Loans

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.

Construction Lending Features:

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

Lot loans up to $1,500,000

Construction financing to $3,000,000 standard and up to $8,000,000 for High Net Worth eligible.

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

Overview
Single close construction to permanent financing.

Loan Purpose
Purchase, finance and cash-out refinance

Products/Pricing
Construction phase: Prime based, interest only based on the amount disbursed. Permanent phase: Lock First allows the permanent financing to be locked prior to beginning construction. Lock After floats the permanent financing until after construction is completed. See daily rate sheet for pricing.

Processes
Modified/Standard (Full Doc), LoanQuick, Asset Based Stated Income

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

Property Type
New construction, remodel or rehabilitation of: 1 unit, PUDs Attached and detached dwellings (i.e. PUDs, town homes) are permitted for both ground up and remodeling. 2 Units. Pre-starts (homes already under construction) are permitted provided there is no delinquency on the existing construction financing.

Not permitted: Condos, coops, manufactured homes, commercial, mixed use, apartments, development projects and spec homes.

Construction Loan Terms
Construction phase (months) 4, 6, 9, 12, 15, 18, 21, 24

Interest Rates
Required Standard. Can be waived under certain circumstances.

Contingency Reserves
Required 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.

Fees
Commitment fee: Lot Loans - $550; CTP Loans - $700. Draw administration fee: 25 bps, with a minimum of $995.

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 $250/each

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

Qualifying Rates
Lock first: qualify at Note Rate for: Fixed Rates, 10/1, 7/1, 5/1, & 3/1
Lock After: Qualify at Note Rate + 1% (using par pricing) for: Fixed Rates, 10/1, 7/1, 5/1, & 3/1. Qualify at Fully indexed + 2% for: 1 Mo, 6 Mo, and 1/1 LIBOR

ARM Caps
5/2/5 for: 5/1, 7/1, 10/1 T-Bill and LIBOR
2/2/6 for: 1 yr, 3/1 T-Bill and LIBOR

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

Valuation and Loan Amount Calculation
The loan amount will be calculated using the LESSER of: 1) total acquisition costs multiplied by LTC matrix (95% LTC to $650M; 90% LTC to $1.5MM, OR 2) appraised value multiplied by LTV.

Pre-Closing Asset Accounting
In addition to bank account balances, brokerage accounts, retirement accounts, 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 assets (if properly documented).

Early Delivery/Prepayment Penalty
The loan is subject to a 1% penalty is any of the following occurs: 1) Borrower requests to roll to permanent phase prior to the end of the committed construction term; 2) Loan fails to roll to permanent phase; 3) Once rolled to the permanent phase, if the permanent loan is paid off prior to 4months and 4 monthly payments.
Full Doc LTV Matrix

Modified/Standard (Full Document)

Purchase and Rate/Term Finance
Primary LTV Loan Amount FICO
95% $500,000 720
80% $1,000,000 680
75% $1,500,000 680
75% $3,000,000 720
Second
85% $500,000 680
80% $700,000 680
70% $1,000,000 680
65% $1,500,000 680

Cash Out Refinancing
Primary LTV Loan Amount Max Cash Out FICO
80% $500,000 $250,000 700
80% $500,000 $500,000 700
70% $700,000 $700,000 680
65% $1,000,000 $700,000 680
50% $1,500,000 $700,000 680
LoanQuick

Overview
LoanQuick is a process featuring preferred documentation for loans that meet minimum FICO score and debt ratio requirements

Credit Score and Qualifying Ratio Requirements
Conforming FICO Max Ratio
Salaried >=720 45.00%
660-719 40.00%
Self-Employed >=720 45.00%
660-719 40.00%

Non-Conforming FICO Max Ratio
Salaried and >=720 45.00%
Self-Employed 660-719 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.
Not Required: Business Returns, K-1s, Balance Sheet, P&L.

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

Commission Income
If commission income is <25% of total, use salaried doc. If commission income is >=25% of total us Self-Employed documentation.

Other Income Sources

Assets
Purchase: 1 month bank statement. Refinance: Not required

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

Important Documentation Requirement
Signed 4506-T required

LTV/Loan Amount Matrix
Use Modified/Standard (Full Document) LTV matrix (Cash-out not allowed). FICO requirements differ than Standard/Modified process type.
High Net Worth Program

Overview
A Full Document initiative designed to offer expanded loan amount and LTV/CLTV parameters on Non-Conforming loan amounts available through Mortgage to High net-worth clients who have $500,000 or more in investable post-close assets. Real estate, loan proceeds, stock options, restricted stock and personal property will not be counted as part of the $500,000 or more in investable post close assets. Investable assets are defined as the face value of deposit accounts, unrestricted stocks, bonds, pledged PAM account assets and retirement accounts held by the individual who is personally liable on the loan. Assets held in a revocable trust may be used provided the trust document states that the borrower has power the revoke the trust. The assets held in trust must be of the investable quality stated above.

Total Debt Ratio
<=45% Assets Two (2) most recent consecutive months' statements and or other documents are required to verify a minimum of $500,000 in investable post-close assets. LTV/Loan Amount Matrix Purchase and Rate/Term Refinance Primary LTV Loan Amount FICO 90% $600,000 680 85% $800,000 680 80% $2,000,000 680 75% $3,500,000 720 65% $5,000,000 720 50% $8,000,000 720 Second 85% $500,000 680 80% $1,000,000 680 75% $2,000,000 680 70% $3,000,000 720 65% $4,000,000 720 50% $5,000,000 720 Cash Out Refinance Primary LTV Loan Amount FICO 80% $1,000,000 680 80% $1,500,000 720 75% $2,500,000 720 65% $4,000,000 720 50% $5,000,000 720 Second 80% $800,000 680 75% $1,500,000 720 70% $2,000,000 720 65% $3,000,000 720 60% $4,000,000 720 50% $5,000,000 720 Conditions, Restrictions, and Other Requirements: Asset Based Stated Income Overview The Asset Based Stated Income Program (ABIP) is designed to utilize verified assets to support the income stated on application. Income stated on this application must appear reasonable for the applicant to be considered. Stated Income Checklist required. Total Debt Ratios Fixed 38%; Arm 40% Pre-Closing Liquid Assets Pre-closing assets = to 6 mos. Stated Income. 100% of retirement and stock accounts can be utilized. 3 months bank statements or other verification required. (See reverse for more information) Reserves 6 months PITI (plus any other construction specific reserve requirements i.e. Transitional Ratios, Contingency Reserves, Interest Reserves, etc.) Credit Scores Fixed Rate (Purchase and Rate & Term): * For a LTV <=75%, the minimum FICO score is 680 * For a LTV >75%, the minimum FICO score is 700
* For Loan amounts over $1.5MM, min. FICO score is 720

ARM (Purchase and Rate & Term):

* Conforming Loan Amounts:
o For a LTV <=80%, the minimum FICO score is 680 o For a LTV >80%, the minimum FICO score is 700
* Non-Conforming Loan Amounts:
o For LTVs, the minimum FICO score is 700
o For loan amounts over $1.5mm, min. FICO score is 720

Fixed Rate and ARM (Cash Out Refinance):

* The minimum FICO score is 700.

Important Documentation Requirements

* Signed 4506-T required
* Signed "Borrower(s) Acknowledgement of Stated Income Amount"

LTV/Loan Amount Matrix

Purchase and Rate/Term Refinance
Primary LTV Loan Amount
95% $500,000
80% $1,000,000
75% $2,000,000 Fixed
75% $3,000,000 ARMS
Second
85% $500,000
80% $700,000
70% $1,000,000
65% $1,500,000

Cash Out Refinance
Primary LTV Loan Amount Max Cash Out
80% $500,000 $500,000
70% $700,000 $700,000
65% $1,000,000 $700,000
50% $1,500,000 $700,000