Construction to Permanent Mortgages
If you are considering building a home, financing your dream could seem confusing. But Redstone Federal Credit Union® has made it simple. A Redstone Federal Credit Union construction-to-permanent loan is specifically designed for members who are building a home. A construction-to-permanent loan combines construction financing and mortgage financing into one loan. Your construction financing simply converts to a permanent mortgage when your house is finished. Since there is one loan, there is one closing. You don't have to spend time and money finding a second loan or paying a second set of closing costs.
Here's what you need to know to get started.
Determine If Your Property Is Eligible
One of the qualifications of a construction-to-permanent loan is that your new home must be an owner-occupied primary residence. The property type must be a one-unit, single-family detached home. Redstone Federal Credit Union also requires the use of a licensed general contractor in the construction of your home.
Make Your Loan Application
When you are ready to begin the application process, contact us. Our Mortgage Loan Officer will walk you through the rates, loan options and loan terms available. Loan products include fixed rate and adjustable rate loans. Our Mortgage Loan Officer will help you determine which is best suited to your situation. In addition to the usual financial information required for a loan application, you will also need to provide the following:
- A copy of the construction agreement with your builder, which must specify the cost of your home including options, upgrades and lot value
- If applicable, a land contract for the lot on which your house will be built
- Plans and Specifications from your Builder
- A deed to the lot
Close on Your Loan
At your closing, you will need sufficient cash to cover the closing costs and minimum down payment associated with the purchase of the lot on which your home will be built. If you already own the lot, Redstone Federal Credit Union will consider equity in that property as a source for meeting down payment requirements. If your home site needs a well and/or septic tank, Redstone Federal Credit Union requires proof of site tests prior to closing.
Obtain Homeowners Insurance
Prior to the first draw on your loan, you must provide Redstone Federal Credit Union with a copy of a standard 12-month prepaid homeowners insurance policy, which must include "builder's risk coverage." This coverage protects you from financial responsibility for any damage, theft or liability that may occur while your home is under construction.
Begin Drawing on Your Loan
Down payment funds that remain after closing will be paid to your builder at the start of construction. When these funds are exhausted, and upon submission of a termite soil treatment letter and foundation survey, you can begin drawing funds from your loan to pay construction costs. You will not start making interest payments until you begin using these loan funds. Your payments during the construction phase are interest-only and are calculated based upon the outstanding loan balance.
Manage Cost Overruns
It's not uncommon for a homeowner to make modifications or upgrades to the original plans when building a new home. If this occurs during the construction of your new home, you must pay any cost increases that result from such changes.
Pay for Home Inspections
Generally, Redstone Federal Credit Union requires six to twelve inspections of your home during the construction phase. These inspection costs will be collected at closing.
Conversion to Your Permanent Mortgage
The construction period concludes when Redstone Federal Credit Union receives the contractor's final lien affidavit, a final survey, final completion certificate and occupancy permit, or its equivalent, from the local governing jurisdiction, and when Redstone Federal Credit Union performs a final inspection of the property. Shortly after your home is completed, we will convert your construction loan into the permanent mortgage you have chosen.
Establish Your Escrow Account
Escrow accounts for real estate taxes and insurance will be established after your home is completed and after your loan converts to the permanent loan. You will be responsible for all tax and insurance payments during the construction phase. Also, when your construction loan is converted to the permanent mortgage, you will be responsible for the reserves needed to establish your escrow account.
Enjoy Superior Service
When you are ready to start building, we want to help. Redstone Federal Credit Union offers one of the top construction-to-permanent loan programs available, and we have the expertise to assist you with the financial aspects of your project. When you work with Redstone Federal Credit Union, you benefit from the many ways we can help expedite your project, including:
- Our construction-to-permanent loans do not require you to sell your existing home during the construction phase.
- We base your loan on the full value of your lot, rather than on the original sale price.
- You benefit from interest-only payments on the funds drawn during construction (up to 9 months).
- We require only one closing which means only one set of closing costs, one appointment with your attorney, and a lot of added convenience.
- Easily apply online, over the phone, or in person by scheduling an appointment at 256-882-8500.
- Competitive rates