wlm4 at cornell.edu (Will
02-20-1995, 12:57 PM
Below is an outline of a owner-occupied home construction loan program
designed by Carol Chernikoff of Alternatives Credit Union. Our experience
is that in rural areas, home building is a viable alternative to home
purchase. However, the availability of finance options for owner-builders
is slim. I hope it is of interest to participants in this list.
CONSTRUCTION LOAN PROGRAM
PURPOSE: This program is designed to allow AFCU members to build their own
homes as well as allow members to hire a contractor to build a house for
them. Owner builder programs are not currently available in our area. We
have received requests from our membership for many years for these loans.
Alternatives previously did owner built construction loans but have not done
them for nine years. We feel that we can reduce our risk by carefully
reviewing all plans and specs and by closely monitoring the construction
projects. Our goal is to do a maximum of four loans this year for a maximum
dollar amount of $360.000.00.
WHO: Owner builders will be required to show sufficient experience in
building and construction to prove they are capable of managing the
construction of their house. The owner builder must submit a description of
their experience, skills, and any training. Their qualifications will be
carefully reviewed by the Credit Union Loan Officer and the Construction
Consultant. If the project is contractor built, the construction loan will
be made to the owner. We will require financials and a complete year to
date profit and loss statement from the contractor. In addition, we will
require a resume and references from the builder.
WHAT: Only owner occupied, primary residence properties. The program is
limited to single family homes or duplexes.
LENGTH OF LOAN: The maximum construction period will be 12 months for owner
builders and six months for contractor built homes.
EQUITY REQUIREMENT: For owner built homes, the borrower must have a minimum
of 25% equity. For contractor built homes, the borrower must have a minimum
of 20% equity of the total cost of the completed project when the project
begins. Only on site, permanent improvements count towards equity.
Deposits on materials or materials purchased for future use do not count
towards equity.
The Alternatives Federal Credit Union must hold a first mortgage on the
property.
MAXIMUM LOAN AMOUNT: $90,000.00
PRE-APPLICATION PROCESS: At least one meeting will be required
with the Loan Officer and the Construction Consultant to review the plans,
materials list, cost estimate, construction timetable, draw schedule. If
revisions or additional information is required, additional meetings will be
scheduled.
APPLICATION PROCESS: At the time of application we will require:
--Residential mortgage loan application
--Purchase offer for proposed land acquisition or Deed and Settlement
Statement if land is already owned
--If land is owned and has existing improvements, a description of
completed improvements with receipts
--Complete description of materials list and specifications
--Plans stamped by a registered architect or professional engineer
--Contractor's contract including proof of insurance, warranty of fitness
of materials and equipment, list of proposed draws, projected occupancy date
--Complete cost estimate (with quotes for materials, permits, bids from
sub-contractors, utility installation) including a 10% (minimum $5000.00)
contingency
--Construction timetable with proposed draw dates
AT CLOSING: At the time of closing we will require:
--Copy of the Building Permit
--Copy of Health Dept. permit for septic system
--Evidence of all required insurance naming Alternatives Federal Credit
Union as mortgagee with receipt for coverage for at least the term of the
construction loan
--Location survey showing the foundation within the legal
limits of the lot lines
--Minimum draw at closing is $5000.00
DRAWS AND PAYMENTS: Interest only payments will be due on the first day of
each month only on the amount outstanding the previous month. Draws will be
disbursed according to the "Draw Schedule". The Draw Request Form must be
submitted with complete information about the work that has been completed.
The minimum draw is $5000.00. Within three business days our Construction
Consultant will inspect your property to insure proper completion of the
required construction to authorize the advance. All required municipal and
construction code inspections and approvals of work completed will be
required prior to disbursement. We will charge an inspection fee for each
advance which will be deducted from the advance before disbursement. Our
attorney must receive and approve an endorsement to the mortgage title
insurance policy covering such advance and evidencing that the property
remains free of other liens and encumbrances. There will be a maximum of
four draws.
INSPECTIONS: Inspections will be required every three months. This
requirement will be fulfilled when draws are requested. However, if draws
are not requested for three months, we will require an inspection to insure
work is proceeding as scheduled.
Our Construction Consultant will be authorized to inspect the site at
critical points during construction.
RECOURSE: The Credit Union reserves the right to hire the contractor of
their choice with funds from the construction loan to complete scheduled
work that has not been completed or correct work that has been incorrectly
done.
LOAN RATE: The interest rate during the construction period will be the
same as our commercial mortgage rate. The rate will not change during the
construction period.
PRIOR TO FINAL DRAW: We will require:
--Health Dept. septic approval
--Health Dept. water quality approval
--Cert. of Compliance or Occupancy & conformance with
zoning & building codes
--Updated survey of completed construction
--Replacement promissory note
--final inspection by appraiser
--final title search
--releases from suppliers and contractors (Contractors'
liens should be released as soon as their work is completed)
FINAL FINANCING PACKAGE: At the time of application for the construction
loan, permanent financing options will be reviewed. By the end of the tenth
month of the construction loan, an appointment will be scheduled to review
permanent financing and begin the application process. This will ensure
sufficient time to secure financing. There are three current options for
permanent financing:
OPTION 1-AFCU's 7/1 program-fixed rate loan for the first seven years and
then becomes a 1 year adjustable rate mortgage. The maximum term is 25
years, maximum loan amount is $90,000.00. The rate will be guaranteed to be
no higher than 1 1/2% than the 7/1 rate at the time of the original
construction loan.
OPTION 2-You can apply for any of our Secondary Market programs. They will
approve you with a maximum rate. At the time of permanent financing, your
application will be reviewed again with current rates. If you no longer
qualify for the original program you applied for (due to higher rates), they
will try to offer you a program that you are qualified for.
OPTION 3-You may secure end financing from another financial institution of
your choice.
************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********
This post transferred from the cdb-l mailing list
designed by Carol Chernikoff of Alternatives Credit Union. Our experience
is that in rural areas, home building is a viable alternative to home
purchase. However, the availability of finance options for owner-builders
is slim. I hope it is of interest to participants in this list.
CONSTRUCTION LOAN PROGRAM
PURPOSE: This program is designed to allow AFCU members to build their own
homes as well as allow members to hire a contractor to build a house for
them. Owner builder programs are not currently available in our area. We
have received requests from our membership for many years for these loans.
Alternatives previously did owner built construction loans but have not done
them for nine years. We feel that we can reduce our risk by carefully
reviewing all plans and specs and by closely monitoring the construction
projects. Our goal is to do a maximum of four loans this year for a maximum
dollar amount of $360.000.00.
WHO: Owner builders will be required to show sufficient experience in
building and construction to prove they are capable of managing the
construction of their house. The owner builder must submit a description of
their experience, skills, and any training. Their qualifications will be
carefully reviewed by the Credit Union Loan Officer and the Construction
Consultant. If the project is contractor built, the construction loan will
be made to the owner. We will require financials and a complete year to
date profit and loss statement from the contractor. In addition, we will
require a resume and references from the builder.
WHAT: Only owner occupied, primary residence properties. The program is
limited to single family homes or duplexes.
LENGTH OF LOAN: The maximum construction period will be 12 months for owner
builders and six months for contractor built homes.
EQUITY REQUIREMENT: For owner built homes, the borrower must have a minimum
of 25% equity. For contractor built homes, the borrower must have a minimum
of 20% equity of the total cost of the completed project when the project
begins. Only on site, permanent improvements count towards equity.
Deposits on materials or materials purchased for future use do not count
towards equity.
The Alternatives Federal Credit Union must hold a first mortgage on the
property.
MAXIMUM LOAN AMOUNT: $90,000.00
PRE-APPLICATION PROCESS: At least one meeting will be required
with the Loan Officer and the Construction Consultant to review the plans,
materials list, cost estimate, construction timetable, draw schedule. If
revisions or additional information is required, additional meetings will be
scheduled.
APPLICATION PROCESS: At the time of application we will require:
--Residential mortgage loan application
--Purchase offer for proposed land acquisition or Deed and Settlement
Statement if land is already owned
--If land is owned and has existing improvements, a description of
completed improvements with receipts
--Complete description of materials list and specifications
--Plans stamped by a registered architect or professional engineer
--Contractor's contract including proof of insurance, warranty of fitness
of materials and equipment, list of proposed draws, projected occupancy date
--Complete cost estimate (with quotes for materials, permits, bids from
sub-contractors, utility installation) including a 10% (minimum $5000.00)
contingency
--Construction timetable with proposed draw dates
AT CLOSING: At the time of closing we will require:
--Copy of the Building Permit
--Copy of Health Dept. permit for septic system
--Evidence of all required insurance naming Alternatives Federal Credit
Union as mortgagee with receipt for coverage for at least the term of the
construction loan
--Location survey showing the foundation within the legal
limits of the lot lines
--Minimum draw at closing is $5000.00
DRAWS AND PAYMENTS: Interest only payments will be due on the first day of
each month only on the amount outstanding the previous month. Draws will be
disbursed according to the "Draw Schedule". The Draw Request Form must be
submitted with complete information about the work that has been completed.
The minimum draw is $5000.00. Within three business days our Construction
Consultant will inspect your property to insure proper completion of the
required construction to authorize the advance. All required municipal and
construction code inspections and approvals of work completed will be
required prior to disbursement. We will charge an inspection fee for each
advance which will be deducted from the advance before disbursement. Our
attorney must receive and approve an endorsement to the mortgage title
insurance policy covering such advance and evidencing that the property
remains free of other liens and encumbrances. There will be a maximum of
four draws.
INSPECTIONS: Inspections will be required every three months. This
requirement will be fulfilled when draws are requested. However, if draws
are not requested for three months, we will require an inspection to insure
work is proceeding as scheduled.
Our Construction Consultant will be authorized to inspect the site at
critical points during construction.
RECOURSE: The Credit Union reserves the right to hire the contractor of
their choice with funds from the construction loan to complete scheduled
work that has not been completed or correct work that has been incorrectly
done.
LOAN RATE: The interest rate during the construction period will be the
same as our commercial mortgage rate. The rate will not change during the
construction period.
PRIOR TO FINAL DRAW: We will require:
--Health Dept. septic approval
--Health Dept. water quality approval
--Cert. of Compliance or Occupancy & conformance with
zoning & building codes
--Updated survey of completed construction
--Replacement promissory note
--final inspection by appraiser
--final title search
--releases from suppliers and contractors (Contractors'
liens should be released as soon as their work is completed)
FINAL FINANCING PACKAGE: At the time of application for the construction
loan, permanent financing options will be reviewed. By the end of the tenth
month of the construction loan, an appointment will be scheduled to review
permanent financing and begin the application process. This will ensure
sufficient time to secure financing. There are three current options for
permanent financing:
OPTION 1-AFCU's 7/1 program-fixed rate loan for the first seven years and
then becomes a 1 year adjustable rate mortgage. The maximum term is 25
years, maximum loan amount is $90,000.00. The rate will be guaranteed to be
no higher than 1 1/2% than the 7/1 rate at the time of the original
construction loan.
OPTION 2-You can apply for any of our Secondary Market programs. They will
approve you with a maximum rate. At the time of permanent financing, your
application will be reviewed again with current rates. If you no longer
qualify for the original program you applied for (due to higher rates), they
will try to offer you a program that you are qualified for.
OPTION 3-You may secure end financing from another financial institution of
your choice.
************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********
This post transferred from the cdb-l mailing list