In order to build a custom home, there are multiple phases of financing in which the buyer and Gems will be involved. The initial phase involves construction financing and the second phase is permanent mortgage financing. We work with several construction loan bankers and Mortgage lenders. Listed here is one that we feel shares our commitment to customer satisfaction:
- Marlow Brothers Mortgage: www.marlowbrothers.net
- Representative: Mike Marlow, mike@marlowbrothers.net
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Typically the buyer uses their lot/land to provide collateral for the construction lender, permanent lender and Gems. This collateral or equity in their lot must exceed or equal 10% of the combined appraised value of the lot and the custom home. For example, a lot valued at $50,000 combined with a custom home price of $250,000 will theoretically create a combined valuation of $300,000. The $50,000 lot, if owned free and clear, represents an equity of 16.67% ($50,000/$300,000) or $50,000. This exceeds the minimum 10% equity needed to satisfy the collateral requirements of Gems and Lenders. Under this scenario, no additional down payment or equity will be required in order to begin construction. In the event that the lot is not free and clear, yet the equity available exceeds 10% of the combined appraised value, then Gems may offer to pay off the lot balance with the first construction loan “draw.” The buyer also has the option of putting additional down payment funds to attain the required 10% collateral position. Gems prefers that the lot be free and clear but on a case-by-case basis, Gems will use the initial construction loan funds to “pay off” the lot in order to begin the project.
Construction Financing
Based upon a commitment letter provided to owner and Gems that states your permanent loan approval and qualification status, construction financing will be provided. The construction funds are used to fund the transaction on a per completion basis. The mortgage lender working with the owner will then obtains the construction loan that Gems can then make “draws” against as needed to pay for materials, overhead, and labor. The amount of the “draws” is dictated by the relative completion percentage that your custom home is in at the time of the “draw” request. Funds are dispersed to Gems on an as-needed basis. As the project nears completion, the construction interim loan becomes fully “drawn” as all of the funds are utilized. When all construction “draws” are done, then the project is near completion and will progress to the final permanent mortgage financing phase of your custom home.
Permanent Mortgage Financing
Permanent financing approval is needed prior to beginning the construction loan process. Final approval is communicated to the buyer and Gems via the commitment letter. This commitment is a commitment to lend (pay off the interim loan) subject to conditions that may include project completion, continued employment status, adequate funds to close, satisfactory liabilities, credit worthiness, and other factors pertinent to the approval decision.
An established mortgage lending and financial planning entity that has provided exemplary mortgage lending and financial planning services to Gems and its buyers for many years. Many competitive loan structures and interest rate options for permanent financing are available to Gems buyers. These include conventional, 30 year, 15 year, adjustable rate mortgages, reduced documentation mortgages, jumbo, single close, and many more customized loan programs designed to satisfy the individual needs of the custom home buyer. The permanent mortgage financing funds are used to retire the construction loan, pay for Gems building services, and to move your loan into your desired permanent mortgage structure.
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