Construction Loans
One-Time Close New Construction
- A One-Time Close New Construction loan is a single closing construction loan. The construction portion is short-term financing that is modified into permanent financing upon completion of the project. A single closing construction mortgage can be closed as a purchase or a refinance.
What is a single closing?
- A single closing construction loan is the combination of financing the construction and the permanent mortgage. There is a single closing transaction that occurs prior to construction beginning.
- Closing costs/fees that the borrower is responsible for are collected at closing. Funds are accessed through draws and there is an initial draw at closing for proceeds to the contractor to begin the construction project.
What is a One-Time Close New Construction Purchase Loan?
- The loan purpose is a purchase when the borrower is not the current owner of the lot on which the home will be built. The borrower is using the loan funds to purchase both the lot and to fund the construction of the property. The loan amount includes the sum of the sales price of the lot and the cost to construct the property minus the down payment.
What is a One-Time Close New Construction Refinance Loan?
- The loan purpose is a refinance when the borrower already owns the lot in which the home will be built on. The borrower is using the loan funds to pay off any existing liens on the lot and to finance the construction of the home. The loan amount includes the sum of any existing financing from purchase of the lot and the cost to construct the home.
GENERAL TERMS
Construction Period – Time frame between the initial draw at closing to completion of the construction.
Initial Draw (Draw at Close) – Amount of funds to be disbursed at closing.
- On a purchase, funds from initial draw are used to purchase the lot and pay the contractor to begin project
- Will appear in Section K of the CD
- On a refinance, funds may be used to pay off existing financing on the lot and pay the contractor to begin
- Will appear in Payoffs & Payments section of the CD
The initial draw cannot exceed 10% of the project cost or $50,000, whichever is less. Anything over this amount must be approved by Granite/UWM on a case-by-case basis.
- There is a draw exception for modular homes at closing, on an exception basis the initial draw can be drawn up to 20-25% of the project cost when stated on the invoice from the manufacturer. Anything over the 10% or $50,000 must be approved by Granite/UWM on a case-by-case basis.
Draw Schedule – Outline of the increments in which funds will be disbursed to the contractor from Granite’s title company – Premium Title Services, in accordance with the construction contract.
- Funds are released based on the percentage of work completed by the contractor in the construction period
- Before each draw is released, an inspection is completed by Granite to ensure the draw requested by the contractor was, in fact, completed and progress was made
- If the builder has not completed the scheduled work, they can request Granite to postpone the inspection and draw and they can give an update when it’s done
NOTE: A title search (title date down) might be required to be completed by Granite’s title company to ensure there are no outstanding liens and that the correct permits are drawn. - There is a 10-business day turn time for Premium Title Services to release the initial draw once it has been dispersed from UWM at closing
- Business days are based on regular business hours of 8am EST–8pm EST Monday-Friday
Construction Management Fee – Cost collected by Granite at closing to manage funds during the construction period and includes the construction draw fee.
- Fee is determined during project approval period and is finalized between Granite & the builder/contractor
- Fee is based on the hard cost of construction
- Only VA loans will include this fee in the builder’s budget
Interest Rate Float-Down – The note rate at time of closing will be the interest rate for permanent financing, unless it’s eligible for an interest rate float-down during the loan’s modification to permanent financing. This process gives borrowers a lower final rate after float-down
- The current market rate is the lowest rate with the same cost basis (prior to LLPAs) as the note rate for the current product as offered by UWM
- A float-down rate adjustment (1/8 of a basis point) will be added to the current market rate if eligible for an interest rate float-down at loan modification
Interest rate float-down eligibility is based on if the sum of the note rate and float-down rate adjustment (“final rate after float-down”) is:
- Less than the current market rate, the note rate will be reduced to the final rate after float-down
- Greater than the current market rate, the note rate will not change and is used for permanent financing
