“I want to build a home, but I don't have 20% down.”
You want to build your own custom home, but you don't have the 20-30% down payment that most banks require in order to get a construction loan. With Georgetown Mortgage, you don’t need to settle for a cookie-cutter home that someone else has already lived in. Build the custom home of your dreams with as little as $0 down. With our program, we base our construction loan approval on the type of permanent loan you will qualify for at the end of construction. For example, if you qualify for a VA loan which allows 100% financing, then we will lend up to 100% on the construction loan.
“How does a construction loan work? It seems complicated.”
It may sound like a daunting process and you don't know where to start. That's why you need Georgetown Mortgage on your side. We make the process as simple as possible and are there every step of the way to guide you and answer any questions you may have.
With our construction loan program, you can either build on property you already own or you can use the loan to also buy the lot or land you want to build on. Once you know where you are going to build, then you can start identifying a builder to work with. Our lender requires that your builder be approved to do business with them. This is simple process of a 1 page credit application and credit check and we will work with the builder directly to get this accomplished. 98% of all builders are approved. We find that most builders are open to working with us since they are able to build a home for someone with as little as $0 down. These are clients that the builder wouldn't acquire without our financing. If you would like to work with a builder that is already approved, let us know. We will refer you to builders that we have worked with in the past.
Once you have identified the builder and they are approved, the next step is to work on plans and specs for the home you want to build. Most borrowers work with a builder to draw up the plans and specs. Some already have plans that they have had an architect design. Once the plans and specs have been finalized, then a contract is executed between the borrower and the builder for the to-be-built home. If the borrower is purchasing the lot/land as part of the construction loan, then the contract for the land is also included. We then order an appraisal and a value is assigned to the property as if it were built today. The appraisal, along with all the credit and income documentation, is submitted to the underwriter for a conditional approval. Once the conditional approval is issued, the loan file is then forwarded to the construction lender for final approval. After the construction lender gives their final loan approval, then the closing is set and final loan documents are then signed.
Construction loans are released in what are called “draws”. This means that the builder will submit a request 3-5 times during the construction of the home for a draw against the construction loan. After the first draw, which generally includes the lot purchase (if applicable) and the foundation pour, subsequent draws require a 3rd party building inspection prior to funds being released to the builder. This process ensures that the home is being built to local building code standards and the builder is making timely progress toward finishing the home.
During the construction period, you will be responsible for making interest only payments each month to the construction lender. Unlike a regular mortgage, interest is only charged against the balance of funds drawn on the loan at the end of each month. So, you are not paying interest on the final loan amount from day 1. You won't pay interest on the full loan amount until the last month of the construction loan since the loan is not fully drawn until that time. Since the interest payments are smaller and the loan is temporary, the interest rate that you are offered isn't as important as the interest rate you are offered on a permanent mortgage.
About 60 days before the construction on your new home is complete, we will start working on the closing for your permanent loan. The loan application is then updated with current credit and income information and a new appraisal is ordered. The Underwriter again reviews the loan file and issues an approval. If there are additional items required to close the loan, we will work with you to obtain the information required by the Underwriter. Once we receive final approval from Underwriting, we can close your permanent mortgage and you will begin making regular mortgage payments.
“My credit isn't perfect. Can I still get a construction loan?”
Georgetown Mortgage is able to offer constructions loans to borrowers with mid scores as low as 640. So, you don't need perfect credit to apply. Since the contruction loan approval is driven by what permanent loan you qualify for, we are able to lend to borrowers with scores much lower than traditional construction lenders like local banks will allow. If you think you have credit issues, you should visit with one of our Loan Originators as soon as possible. We can review your credit report with you and help you devise a plan to improve your credit scores over time.
“Does it matter where I want to build a home?”
Currently, Georgetown Mortgage is only able to offer this program when the property is located within a 130 mile radius from San Antonio, Texas. We are currently working on another construction program which will be available for properties across the State of Texas. If you would like more information when this program is available, please call one of our Loan Originators today and let them know to contact you as soon as the program becomes available.