Construction and Permanent Loans

Cheryl Freeman

“Hi, I’m Cheryl Freeman with MVB Mortgage.  I’ve been doing financing for Stanley Martin since 2006 and I’m going to talk to you a little bit about Construction Loans.

Construction Loans are totally different than a Resale Loan. There are so many more nuances and customization than to finance a new apartment. The client really needs to sit down with a specialist and talk about their needs and what you’re trying to accomplish and look at the details of their specifics. They’re a little bit more stringent to get, requires a little reserves, and overall the process is totally different. So do yourself a favor and sit down someone who specializes in Construction Loans, not Resale Loans. Everybody has their favorite loan officer, however, you need a specialist who is aware of how the process works and all the nuances and now all the people who come into play doing your process.”

About Cheryl Freeman

Cheryl Freeman set the standard by consistently ranking in the top 1% nationally in residential loan originations since she entered the mortgage business in 1992. Prior to becoming a mortgage specialist, she was a successful local real estate broker. Her record of success stems from a simple vision of the way to do business: directly, gently, and quickly. She treats people the way she would want to be treated, and her satisfied clients affirm the results of her people-oriented philosophy and conscientious efforts on their behalf. She looks forward to the opportunity to count you as one of her many satisfied home buyers.

Jerry Berry

“You know, we get a lot of questions about financing a construction project. Construction (to) perm financing (permanent loans) is a little different than just financing a home.

Think of a construction to perm (permanent loan) process as a big home equity line of credit.

Let’s say the cost of the project is a $1 million, the cost of land is $400,000, and the cost of the improvements is $600,000.

We’ll have you put your money in upfront – your down payment. Normally, we’ll have you put in 20%.

The construction line jumps in and buy the lot. So if the cost of line was $400,000 you put in $200,000. We have an outstanding balance on your loan of $200,000 dollars.

So you’ll start making interest-only payments on the outstanding balance of the loan. It’s a monthly payment.

Now, that payment was going to increase over the life of the loan as the builder calls us for – ‘draws’ – they’re called.

Every time the builder has done – say 15% of the project – he would give us a call.

We’ll send an appraiser out to verify that the builder has actually done through the amount of work necessary and will disperse those funds with him.

Let’s say that was a $100,000 in this particular draw.

So now the outstanding balance on your line is $300,000.

So you’ll start making interest-only payments on that $300,000 versus $100,000 to $200,000 and this will continue until the home is 100% complete and you’d use the total $800,000 that we set up another particular line of credit for that particular construction loan.

Once the home is complete, we’ll roll that loan into a fully amortized loan interest only and principle along with your taxes and your homeowner’s insurance. Again, when home 100% complete.

It’s not until then that we’re going to disperse the balance of the funds to the builder.

And from there, you’ve got a loan that’s fixtual level time period. Do you feel like you want to have it fixed more?

So, it’s not a scary process. We do we do a lot of these and construction (to permanent loan financing) is definitely a good way to build your next home.”

About Jerry Berry

Jerry Berry is currently the Executive Vice President of First Heritage Mortgage L.L.C. Jerry prides himself in being the loan officer that knows how to handle all types of loans including VA, FHA, VHDA, Conventional, and more.

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