No one likes surprises, so here’s a brief description of about the application, closing and draw process before you begin.
Pre-Qualification – We start with a phone call. We will discuss your employment, income, cash on hand, credit, land (if you already own it) and what you’re plans are. If you wish to proceed, we move to Step 2 and begin to collect documents.
Documentation – I would need the following documents from you;
Income- Your most recent 30 days of pay stubs and last two years of federal income tax returns. If you are self employed, own other real estate, and/or write off business expenses, we will need your last 2 years of tax returns.
Assets – Your most recent 2 months of statements for all your cash accounts (checking, savings, investment and retirement).
Identification – Federal law requires that I collect copies of your driver’s license and social security card.
Land – If you already own the land you wish to build on, I need a copy of the deed, survey (if you have one), and settlement statement if you have purchased the land within the last year. You can use your land equity in lieu of a cash down payment.
Purchase Agreements – You eventually will need signed agreements for all work to be performed including the home.
Builder Approval – If your builder is not already on the lender’s approved list, then they must fill out a builder approval application. The application will be reviewed by the lender. This is a critical step. If a builder is going to have an issue with filling out the application and providing the needed documents, it best to find out at the start of the process.
Formal Application – The application will be emailed to you for eSigning. I will go over the application with you before you sign. We can spend as much time as you like going over any questions you have. Needless to say, it’s very important that you understand what you are signing.
Underwriting – The first step is to submit your application through the automated underwriting system. If you application is approved then it will be reviewed by the human underwriter and given conditional approval. It is common for an underwriter to asks for additional documents for final approval.
Appraisal – A value is given to your project based on other recent home sales. The appraiser won’t find identical sale to your home so they will make adjustment based on the guidelines the lender has given them. This is critical step. You should take a close look to the home sales in your area to make sure you are not overbuilding or adding costly upgrades that will not improve the appraised value.
Final Approval and Closing – Once your file has been given final approval, we will sign all the closing documents at a title company. The land will be put in your name (if it isn’t already), any lien will be paid, and construction will begin.
Draws for Construction – As work is completed, payments are issued to the builder, subcontractors and suppliers. The appraiser will do an inspection on every draw to confirm that the work the builder says is done is in fact done. Your builder will turn in a Sworn Statement and waivers of lien to document who has been paid and who has not. This is all for your protection. You don’t want a contract knocking on your door saying they were not paid and they are going to lien your home.
Completion, C of O and Final Draw – Once the project is completed and the Certificate of Occupancy is issued, the builder will receive their final payment.
Modification – Your loan with the lender is modified from a construction loan to the FHA, VA or conventional loan and your payments begin.Again, this is just a brief description. I’d be happy to discuss your construction project and go into more in detail with you on the phone or in person. Feel free to email or call – (586) 917-5534.
Jerry Thomas, Mortgage Loan Officer NMLS #134090