So you want to know more about Construction-to-Permanent loans? You came to the right place. Here is a step-by-step overview of how the C/P process works from beginning to end.
You decide you want to build a new home or do a major renovation on your existing home. Contact LFS Home Loans for a preliminary loan consultation and go over options for Construction loan programs as well as how much you can afford.
Buy plans or hire an architect for your new home or renovation. With plans in hand, interview contractors and builders and get an estimate of construction cost and how long it will take to complete. Have prospective builders or contractors complete the questionnaire. If you are building a new home and donít already own the land, you will have to find the land and make an offer to purchase the land.
Once you have decided on plans and a contractor or builder, bring that information along with the questionnaire back to LFS Home Loans, where a more detailed and accurate loan application will be completed based on your specific plans and costs. LFS Home Loans will then gather additional information from you and your builder and send the file off to underwriting. During this step, the draw schedule will be finalized with you and the builder.
Once underwriting is complete and all documentation is gathered and agreed upon, your loan is ready for closing. At the closing, and attorney will review all of the information with you and your LFS Home Loans representative. If you are buying the land or there are any liens on the property, those will be paid off at the closing. After closing, construction begins.
During construction the builder will reach specific milestones as specified in the draw schedule, and request money for work performed. LFS Home Loans or the lender will send an appraiser out to inspect that the work has been completed to plans, and will release the draw to the builder. This will happen for each draw as described in the draw schedule. Remember, during construction you will only pay for the amount of money used at that point, and generally only have to pay interest-only.
When the house is complete, a Certificate of Occupancy will be issued by the county. Once the Certificate of Occupancy is obtained and construction is complete, the loan will convert to permanent financing with the terms and rates as specified at your initial closing. Now you can move into your dream house!