Land – Home Opportunities

Construction-to-Permanent Financing

When buying a new home, especially when the new home is in a tract housing development, the builder often makes arrangements for the financing of the land and the construction of the home.

When a builder does arrange the financing of the land and the construction, homebuyers can use the Rural Development Loan or other government and conventional loan programs to purchase the property when the construction is complete.

In some cases, however, the homebuyer may prefer to get a loan to finance the land and construction, or it may be necessary when the builder is not in a position to provide the financing.

Most government and conventional loan programs – including the USDA Rural Development program – do not offer financing to purchase raw land and construct the home. They simply provide the financing to purchase the home after it is complete.

To help, Rocky Mountain Mortgage Specialists offers portfolio construction loans. These loans provide the financing necessary to purchase the land and construct the home that, when complete, become an eligible property for the government and conventional loan programs.

When the construction is complete, we then originate a Rural Development loan or other loan to pay off the construction loan. This second loan would be considered the permanent “take-out” financing of the interim construction loan.

When the take-out loan is a Rural Development loan, we can in most cases arrange for 100 percent financing so that the land, permits, fees, site development, utilities, home, landscaping, and settlement costs are covered without a down payment from the homebuyer on either of the two loans.

Partnership with Other Construction Lenders

Rocky Mountain Mortgage Specialists also works in partnership with other construction lenders at the request of homebuyers to provide the take-out financing of the construction loan.

In those cases, we process and underwrite the permanent take-out loan based on a credit package, drawings, specifications, construction bids, and an as-built appraisal.

Prior to construction, we provide the construction lender written loan approval of the permanent take-out loan and supporting documentation.

One-Time Close

A one-time close construction loan is also available through Rocky Mountain Mortgage Specialists. This loan serves as a line of credit during the construction phase and then converts a traditional mortgage after construction through a simple modification of the promissory note.

At the time of modification, the homebuyer can select from a wide spectrum of conventional mortgage products and terms ranging from a 30-year fixed to an interest-only ARM.

Homebuyers benefit from the one-time close, compared to an interim construction loan followed by a take-out permanent loan, because there is only one loan approval, one set of settlement costs, and one closing. It is simpler, takes less time, and costs less.

We require a five percent cash investment from the homebuyer or five percent land equity, and we require a 620 score with full documentation or 680 with reduced documentation.

Modular and stick-built properties are eligible for the program. Manufactured (HUD-code) properties are not eligible.

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Rocky Mountain Mortgage Specialists, Inc.