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Conforming and Jumbo Construction Loans.
10% Down, 6% Seller Closing Credit Allowed
Yes you can build your own home as little as 10% down!
Conforming Construction Loans Program Guidelines
Loan Purpose
- Finance Construction Costs
- Purchase a lot
- Land can be currently owned, including:
- Recently purchased
- Owned Free and Clear
- With a current mortgage
Credit Score and Maximum Loan Limit
| Primary Residence – Construction/Construction-To-Perm | |||
|---|---|---|---|
| Loan Limits | Maximum LTV | Minimum Credit Score | Maximum Loan Amount |
| Conforming Loan Limits | ≤ 90.00% | 720 | $453,100 |
| ≤ 70.00% | 700 | ||
| High Balance Loan Limits | ≤ 90.00% | 720 | County Specific. Click Here to Search |
| Jumbo Loan Limits | ≤ 85.00% | 760 | $1,000,000 |
| ≤ 80.00% | 720 | $1,500,000 | |
| ≤ 70.00% | 720 | $2,500,000 | |
| Second Home - Construction/Construction-To-Perm | |||
| Jumbo Loan Limits | ≤ 75.00% | 720 | $1,000,000 |
| ≤ 70.00% | 720 | $1,500,000 | |
| ≤ 65.00% | 720 | $2,000,000 | |
| ≤ 50.00% | 720 | $2,500,000 |
Credit Profile
- Credit score as determined by above matrix (no exceptions)
- Desktop Underwriting findings must be “Approve/Eligible” for Conforming and High Balance Loan limits and “Approve/Ineligible” for Jumbo Loan limits
- Waiting period after a major negative credit event:
| Conventional Loan Type | BK – Chapter 7 | BK – Chapter 13 Discharged | BK – Chapter 13 Dismissal | Foreclosure* | Short Sale, Deed-In-Lieu, Pre-Foreclosure* | Modified Mortgage* |
|---|---|---|---|---|---|---|
| Standard | 4 years | 2 years | 4 years | 7 years | 4 years | 2 years |
| With Extenuating Circumstance | 2 years | 2 years | 5 years | 3 years (requires 10% down) | 2 years | No waiting period |
* If a property was included AND surrendered (i.e. property wasn’t retained and the debt wasn’t reaffirmed) in a Chapter 7 Bankruptcy, the borrower may potentially be able to defer to the Chapter 7 waiting period Vs. the Foreclosure waiting period.
Reserves
- For Conforming and High Balances Loan limits the reserve requirements are based on Desktop underwriting findings
- Jumbo Loan reserve requirements are as follows
| Occupancy | Loan Amount | Required Reserves |
|---|---|---|
| Primary Residence | Up to $1,000,000 | 9 months |
| $1,000,000 to $1,500,000 | 21 months | |
| $1,500,000 to $2,000,000 | 27 months | |
| $2,000,000 to $2,500,000 | 30 months | |
| Second Home | Up to $1,000,000 | 15 months |
| $1,000,000 to $1,500,000 | 21 months | |
| $1,500,000 to $2,000,000 | 27 months | |
| $2,000,000 to $2,500,000 | 39 months |
Construction Timeframe
- Construction timeframe will be assessed on a case-by-case basis based on a typical construction time for the scope of the project, construction type, time of the year, and location of the property
- Maximum construction time-frame is as follows:
- Conforming loan limit: 12 months
- High Balance loan limit: 12 months
- Jumbo loan limit: 24 months
- Construction can start immediately after closing
- During the construction period borrower only makes interest only payments
Draws
- The initial draw at closing will cover upfront costs; including payoff the lot, building permit, architectural fee
- Draw amount will be based on inspections and percentage of completion
- The quantity of allowable draws are based on the loan amount (see below)
- Final draw is paid after the Certificate of Completion or Occupancy is issued
OTC Administrative Fees, Draws, and Construction Interest
- The lender will use a third-party Draw Administrator to perform a builder review, project review, and act as a draw administrator. The number of draws and fees charged by the Draw Administrator will vary as follows:
| ≤ $200,000 | $200,000 - $453,100 | $453,101 – $650,000 | $650,001 – $1,000,000 | $1,000,001 – $2,500,000 | |
|---|---|---|---|---|---|
| Construction Draw Fee | $1,400 | $1,750 | $2,650 | $3,650 | 55 bps |
| Incl. Number of Draws | 3 Draws | 5 Draws | 7 Draws | 10 Draws | 12 Draws |
| Additional Draws | $265 | $265 | $275 | $295 | $350 |
| Final Inspection | $175 | $175 | $175 | $175 | $175 |
| Final Title | $175 | $175 | $175 | $175 | $175 |
| Title Updates/Endorsements | Based on title quote from Settlement Agent | ||||
| Survey | $750 |
- Interim Construction Interest Rate*
- To determine the Construction Interest Rate, use the locked interest rate and add the following
| Construction Term | Rate Adjustment |
|---|---|
| 6 Months | .50% |
| 9 Months | .625% |
| 12 Months | .75% |
| 18 Months | 1.00% |
| 24 Months | 1.25% |
* This is not the permanent interest rate of the borrower’s loan. It is the interim interest rate accruing during the construction period. The borrower is responsible for making the interest only payments, only on the amount drawn, during the construction period
Builder/Retailer Responsibility
- The builder/Retailer must act as the only General Contractor (“GC”) on the project
- GC can’t be related to the borrower(s) or an employee/employer of the borrower
- GC must be insured, licensed, and bonded
Loan Amount
- See above chart under “Credit Score and Maximum Loan Limit”
Mortgage Insurance Premiums
- All loans above 80% Loan-To-Value (LTV) require mortgage insurance coverage according to the following guidelines:
| Mortgage Insurance Premiums | ||
|---|---|---|
| LTV | 30-Year | 15-Year |
| 85.01 – 90% | 25% | 12% |
| 80.01 – 85% | 12% | 6% |
Ratios
- As determined by Automated Underwriting System or AUS. Requires a Desktop Underwriter “Approve/Eligible” or “Approve/Ineligible” findings
- Manual underwrite not accepted on the Conforming OTC program
Property Type
- Eligible:
- One-unit properties only
- Stick Built Housing
- Modular Homes
- Detached site condominiums
- Rural Properties
- Tear-downs & major renovations (eligible with 12-month construction period only)
- Ineligible:
- Manufactured Housing
- 2-4 unit properties
- Properties where construction has already begun
- Lots in excess of 10 acres
- Log homes
Occupancy
- Owner occupied
- Second homes
- Ineligible – non-occupant co-borrowers/co-signers
Documentation
- All loans must be fully documented per Agency Guidelines
- For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)
Down Payment/Closing Costs
- For Down Payment amount, see above chart under “Credit Score and Maximum Loan Limit”, based on the combined purchase price of the land and construction costs
- If already own land, the down payment can come from equity in the land
- Seller and Builder contribution toward buyers closing costs and escrows up to 6%
- For Conforming and High Balance Loans, down payment and closing cost help may be gifted
- For Jumbo Loans minimum 10% down required from borrower’s own source of funds
Terms
- Amortization period: 15 and 30-year fixed rate
