One-Close construction loans and Rehab loans are designed to allow clients to borrow funds to build new, or renovate an existing home, using the value 'as finished', to qualify. Like standard loans, they all have the qualifying underwriting requirements of income, debt ratios, credit, assets, etc., as well as the additional requirements of acquistion costs, builders, inspectors and more. While it is always important to have the help of a loan officer when obtaining a mortgage, construction/rehab loans require top expertise to assist you with the many moving parts and interconnected variables. The major key is that these loans meet required 'guidelines' set by FannieMae on Conventional, and by the lender on Jumbo.

 

One-Close Construction -

• Build your custom dream home on land you purchase or currently own.
• On a purchase, the appraiser will use the land being purchased, and construction costs, to appraise the overall package as though the home is complete. This helps determine the minimum down payment to the overall cost or "Acquisition".
• On a refinance it is similar how the appraiser will determine the value, though many times your equity in the land will be your "down" or equity for LTV.
• "Acquistion Cost" will be a new term you will become familiar with. Basically, acquisition cost includes the sum of qualifying construction costs in the builder's contract, and the cost of the land (or value if you already own it). Payments made by the borrower directly to the builder, or purchases of materials outside of the builder contract, do not get added to acquistion cost. Soft costs such as architectural services, engineering and permit fees may be financed.
• You pay 'interest Only' monthly payments on the outstanding balance each month during the 9 or 12 month construction phase of the loan
• At the end of construction phase, the loan modifies to an amortized 30 year fixed rate loan.
• Builder Fixed Price Contracts only. No owner-builder nor sweat equity allowed.
• Builders will supply "Plans and Specifications" and a "Materials List" with itemized cost breakdowns and get paid as they go in draws.
• No cash back is allowed. Any funds left over at the end of the construction phase are applied as a principal reduction.

 

Rehab - 

• Purchase a home that needs work, or remodel a home you own.
• Use the appraised value, as though the planned work is complete, to qualify for the renovations. Even if you only put 5% down on a purchase, or have little equity in your home now, you may be able to borrow ten's of thousands of dollars for improvements as long as the upgrades increase the appraised value enough to qualify.
• There are no required improvements or restrictions on the types of renovations allowed. Generally, improvements should be permanently affixed to the real property though certain appliances installed with kitchens and utility rooms are allowed. 
• A Rehab loan can be used to construct outdoor structures allowed locally such as Accessory Units (ADU), garages, recreation rooms and swimming pools.
• Renovation costs may include Property Inspections, Title Updates, Architectural/Engineering fees, Independent consultants, Permits, Energy reports, appraisals, renovation plan reviews, and draw fees.
• Rehab loans are a 30 Year Fixed Conventional loan and you make normal payments on the entire loan from the start.
• Construction is to be completed within 12 months from the closing date.
• Contractor Fixed Price Bid/Contract only. No owner-contractor nor sweat equity allowed.
• Contractor will supply "Plans and Specifications" and a "Materials List" with itemized cost breakdowns. They can get paid as they go in draws.
• No cash back is allowed. Any funds left over at the project completion are applied as a principal reduction.

 

Mortgage Insurance (MI) is required on any Rehab or One-Close conventional loan with less than 20% down on a purchase, or more than 80% LTV on a refinance. One-Close Jumbo do not require MI.

 

While the lender's guides are 100's of pages long, this brief description are some of the general requirements. There are restrictions and you can't necessarily combine parameters and get a loan. Construction and Rehab Mortgage loans change requirements frequently. Requirements change without notice. Please call us to discuss your situation and goals. It is too complex to try and learn all the nuances on the internet.

 

ONE-CLOSE CONVENTIONAL:

Purchase Land at same time Minimum Down Payment as a percentage of acquisition cost, or appraised value, whichever is lower. [If you already own the land, Maximum Loan to Value = acquisition cost, or appraised value, whichever is lower]:

Owner Occupied, SFR, PUD - 1 unit                       10.1%         [89.9%]

 

Second Home, SFR, PUD - 1 unit                            20%          [80%]

 

ONE-CLOSE JUMBO:

Purchase Land at same time Minimum Down Payment as a percentage of acquisition cost, or appraised value, whichever is lower. [If you already own the land, Maximum Loan to Value = acquisition cost, or appraised value, whichever is lower]:

Owner Occupied, SFR, PUD - 1 unit                       15%           [85%]       To maximum project size $1,500,000 and maximum loan $1,000,000

                                                                                  20%          [80%]       To maximum project size $1,500,000 and maximum loan $1,500,000

                                                                                  25%          [75%]       To maximum project size $1,500,000 and maximum loan $2,000,000

 

Second Home, SFR, PUD - 1 unit                            25%           [75%]       To maximum project size $1,500,000 and maximum loan $1,000,000

                                                                                   30%          [70%]       To maximum project size $1,500,000 and maximum loan $1,500,000

                                                                                   35%          [65%]       To maximum project size $1,500,000 and maximum loan $2,000,000

 

REHAB PURCHASE:

Minimum Down Payment as a percentage of the sum of purchase price/renovation costs/other eligible costs, or appraised value, whichever is lower:

Owner Occupied, SFR, Condo, PUD - 1 unit          3%  (5% if not a First Time Buyer)

Owner Occupied, Duplex - 2 units                         15%

Owner Occupied, Triplex/Fourplex - 3-4 units      25%

 

Second Home, SFR, Condo, PUD - 1 unit               10%

 

Investment, SFR, Condo, PUD - 1 unit                     25%

 

REHAB REFINANCE:

Maximum Loan to Value = percentage of value:

Owner Occupied, SFR, Condo, PUD - 1 unit          95%  

Owner Occupied, Duplex - 2 units                         85%

Owner Occupied, Triplex/Fourplex - 3-4 units      75%

 

Second Home, SFR, Condo, PUD - 1 unit               90%

 

Investment, SFR, Condo, PUD - 1 unit                     75%

Pacific Sunset Mortgage, LLC. NMLS #1086349 ML-5769. Steve Emory Sr Loan Officer NMLS #45523. I am authorized to conduct business in Oregon and Washington States. 15455 NW Greenbrier Pkwy  Suite 100, Beaverton, OR 97006. Certain restrictions apply. This is not a commitment to lend. Applicants must qualify and Not all applicants will qualify. Equal Housing Lender. All opinions expressed by Steve Emory, on this website, on his Facebook pages, are Steve's opinions and do not reflect the opinions of Pacific Sunset Mortgage, LLC. You should not treat any opinion expressed by Steve as a specific inducement to take a particular mortgage or follow a particular strategy, but only as an expression of his opinion. You must make an independent decision regarding mortgages or strategies mentioned on his website. Before acting on information on this website, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial counselor. http://www.nmlsconsumeraccess.org/entitydetails.aspx/COMPANY/1806349