OneTime Close Construction Loans
product highlights offered by one of my main lending partners :
I ’ ve worked on numerous individual home construction loans and large residential development tracts over the past few decades . Yet , I ’ ve never seen a better , easier , and more affordable home construction loan option for owners who are interested in building a brand new “ dream home ” for their family .
Generally , a person may need two or three separate loans to build a new home that may include a land purchase loan ( 40 % to 50 % LTV ranges are more the norm ), construction loan , and a final 30 year takeout or permanent loan to pay off the construction loan .
With a OneTime Close Construction Loan , the borrower applicant qualifies for one loan to buy the land , build the home , and keep the same loan for up to 30 years all within one loan closing option . This way , there ’ s one credit report pull , one loan underwriting and approval process , one down payment unless it ’ s a VA loan ( up to 100 % financing ) or a very low down payment requirement for FHAinsured and conventional loans ( up to 95 % to 96.5 % LTV ).
Let ’ s review below some of the loan
Conventional Loans
* Available on 15and 30year fixed conventional , high balance and 7 and 10year ARM options * Eligible on primary , second or vacation home , and investment property purchases and rate / term refinances * Loan amounts up to the conforming loan limits * 700 + FICO , up to 95 % LTV * 11month maximum build period with 1month modification period * Interestonly monthly payments during the build period
VA Loans
* Available on 30year fixed loans * Loans up to $ 4M * Eligible on primary home purchases and cashout refinances * 580 + FICO , up to 100 % LTV * 11month maximum build period with 1month modification period ( build period is deducted from the loan term ) * No monthly payments during the build period
Rule of 72 and Power of Leverage
Real estate has proven to be an exceptional hedge against inflation over the past 100 years . In some economic boom years , home values may double in value every 2 , 3 , 5 , 7 , or 10 years . With minimal down payments , the true annual cashoncash returns are much higher than most people realize .
The Rule of 72 is an investment
formula used to estimate how long it may take for an asset to double in value using a projected annual rate of return . If homes in your region have increased 7 % per year over the past several years and home appreciation continues at the same pace in the future , then it may take 10 + years for your new home to double in value using the Rule of 72 ( 72 / 7 or 7 % = 10 + years ). Most firsttime home buyers use high mortgage leverage within a 0 % to 6 % down payment range ( 6 % down is average ).
Let ’ s use 20 % down payment for an estimated cashoncash return for an owneroccupied or investment property buyer . At a 7 % annual appreciation rate average , the cashoncash return is actually 5 times 7 % ( 20 % down 1 / 5th ; 80 % bank 4 / 5th ) for a total 35 % annual cashoncash return .
Time and inflation can be two great allies to eliminate the mortgage debt as your home rises in value thanks to the power of leverage and inflation .
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