ONE-TIME CLOSE (OTC) CONSTRUCTION-TO-PERMANENT LOANS COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

Transcription

1 CONSTRUCTION-TO-PERMANENT LOANS Last Revised: 03/09/2017

2 ONE-TIME CLOSE (OTC) PROGRAM OVERVIEW American Financial Resources, Inc. offers a unique Construction-to-Permanent loan for the purchase of new manufactured, modular, and site-built homes under the One-Time Close program. Our One Time Close loan program combines the low down-payment & affordability of the FHA/VA programs while fulfilling the increasing demand for new housing in today s market. COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

3 PROGRAM OVERVIEW The One-Time Close program provides interim construction financing, lot purchase (if need be) and permanent loan all wrapped into one. Because the permanent loan is closed before construction begins, there is no requalifying of the borrower when converting from the construction phase to the permanent phase of the loan. Therefore there is no need for re-appraising, second closings, or incurring additional closing costs. COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

4 FEATURES No longer does the builder/dealer have to require significant down payments and offer high variable rate construction loans in hopes that the borrower s credit situation remains steadfast in order to refinance into a permanent loan. Low FHA/VA fixed rates. The rate is locked prior to closing (and construction) for the life of the loan. No mortgage payments for the borrower to make throughout the construction period. No construction interest payments for the builder/dealer to make throughout the construction period. The loan is 100% in place PRIOR TO CONSTRUCTION! COPYRIGHT 2015 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 4

5 ELIGIBLE CONSTRUCTION TYPES INELIGIBLE CONSTRUCTION TYPES One Unit Homes Single-Wide Manufactured Homes New Manufactured Construction. No Multi-Units or Multiple Homes on One Lot. New Modular Construction. New Site/Stick Built Housing. Log Homes, Bamboo Homes, Metal Homes, Tiny Homes, Storage Container Homes and unique/niche construction types. 5

6 LOAN GUIDELINES PROGRAM OVERVIEW Type of Loan: permanent loan is FHA or VA only Owner-Occupied only Maximum loan amount: FHA: FHA County Mortgage Limit (high balance) VA: FHFA limit (high balance / jumbo) Maximum financing FHA 96.5% LTV / VA 100% LTV 620 minimum credit score requirement All ordinary FHA/VA guidelines apply Ratios: As determined by AUS (must receive DU Approve/Eligible or LP Accept) COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

7 WHAT ABOUT THE LAND? The land can be currently owned (build on own land): -recently purchased -free & clear -or even with a mortgage(s) The land can be purchased: -simultaneously from the retailer/builder -or even a third party Land may even be gifted (all Standard FHA/VA gift guidelines apply). Land equity will be used as borrower s down payment (FHA). Seller Concessions are allowable to maximum FHA/VA guidelines. Therefore is FHA borrower owns the land and has equity, they may be able to come to the table with no money down (VA is 0 down). COPYRIGHT 2015 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 7

8 THE BUILDER/RETAILER The Retailer/Builder must act as and be the General Contractor (or Construction Coordinator) therefore they are responsible for turnkey completion of the home and all site improvements. No Self-Help : The borrower cannot be responsible for or perform any aspect of the construction/site improvements. Nor can they be responsible for hiring any sub-contractors to perform such work. No related parties or Identity of Interests between borrower and builder/retailer COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

9 CONSTRUCTION TIME FRAME Allowable construction timeframes are subjective and determined based upon construction type, geographic region, etc. Nine months is the maximum construction timeframe, however scenarios will be assessed on a case by case basis by AFR. For example, if a Modular Home is going to take six months or Site-Built eight months in the northern part of the US during the winter, then this may be considered acceptable. Likewise, a Manufactured home taking five months in Florida, this would be questioned and require more information prior to making a decision. Unfortunately there is no one-size fits all, allowable construction timeframes are subjective and determined based upon construction type, geographic region, etc. COPYRIGHT 2015 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 9

10 HOW DOES IT WORK? AFR utilizes a third-party who administrates the construction funds and charges fees (recognized as Construction Financing Soft Costs) for their role in the construction funds administration. The Administrator estimates the required construction interest based on the builder s/retailer s guidance prior to underwriting. All Administrator s fees and the estimated construction interest are not charged to the borrower, but directly to builder/retailer and therefore will be included in the sales price of the home. COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

11 ADMINISTRATOR'S FEES AND CONSTRUCTION INTEREST Construction Administration Fee is 2.25% of permanent loan Note amount Construction Underwriting Fee is $250 Construction Closing Coordination Fee is $275 Construction Inspection Fee is a total of $450 for Manufactured/Modular Construction Construction Inspection Fee is a total of $750 for Site- Built Construction Interim/Construction Interest Rate*: Currently 8.00% on all Site-Built Homes and 9.95% on all Manufactured/Modular Homes. NOTE: This is not the permanent interest rate of the borrower s loan, it is the interim interest rate accruing on disbursed construction funds only which are estimated in advance. Once again, the Administrator s Fees (recognized as Construction Financing Soft Costs) and Construction Interest are not charged to the borrower, but directly to builder/retailer and therefore will be included in the sales price of the home. 11

12 TARGET MARKET This program IS NOT for the borrower or builder looking to build the million dollar custom home, with perfect credit and significant money down. It IS for first time homebuyers and homeowners looking for affordable options from the lack of existing homes on the market. First time homebuyers and homeowners in need of low to no down payment options. The OTC program is not so much a borrower loan program, but rather a builder/dealer program which augments their ability to sell and build new homes, with less risk, and penetrate a larger segment of the market. COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

13 ONE-TIME CLOSE (OTC) THE PROCESS Three Stage Process 1. Builder Approval & Loan Calculation 2. AFR Credit Underwriting 3. Construction Underwriting COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

14 STAGE 1 STEP 1 BUILDER REGISTRATION AND LOAN CALCULATION Builder/Retailer Registration Package (on AFR s website under the OTC program): completed package to OTC@AFRWHOLESALE.COM Builder/Retailer Summary Application Contractor s Performance Agreement Disbursement Instructions Copy of Contractor s/dealer s State License Evidence of General Liability Insurance Evidence of Worker s Compensation Insurance Evidence of Dealer s Open Lot/Builder s Risk Builder s Risk Insurance (Site-Built only) Most recent two years tax returns (Site-Built only) Year-to-Date profit & loss statement and current balance sheet (Site-built only) Executive Summary providing an overview of experience (Site-Built only) Builders and retailers are reviewed by our Administrator, once registered, only items that expire such as insurances and licenses need updating on future deals 14

15 STAGE 1: STEP 2 GATHER THE FOLLOWING: 1. Loan Calculation Request Form 2. Initial Fees Worksheet and send to: OTC@afrwholesale.com Submitting these will determine what the loan amount and purchase price will be. We will do the calculations for you. AFR will send you back the results 15

16 STAGE 1: STEP 2 (cont.) You will receive: CALCULATION RESULTS A. Construction/Permanent Loan Information Sheet B. Construction Cost Breakdown C. Purchase Agreement Worksheet 16

17 STAGE 1: STEP 2 (cont.) CONSTRUCTION/PERMANENT LOAN INFORMATION SHEET This is a summary of the transaction detailing how the purchase agreement price was arrived, acquisition cost, loan amount needed, cash needed to close, etc. This is the basis for your blue-print for your 1003 outlining the borrower s loan amount and the purchase price of the home. Be sure to make your 1003 matches your Results 17

18 STAGE 1: STEP 2 (cont.) Construction Cost Breakdown This form is pre-filled with the contract information and ready for the Builder/Retailer to itemize, complete, & sign This will ultimately be the basis for all draws during the construction phase 18

19 STAGE 1: STEP 2 (cont.) PURCHASE AGREEMENT WORKSHEET Pre-filled with the breakdown of the new calculated contract price, shows estimated net for the home and improvements to the Builder/Retailer, and ready to be signed by the Builder/Retailer The Builder/Retailer must draw a new purchase contract to match this form 19

20 STAGE 1: STEP 2 (cont.) *IMPORTANT* If at any time the fees/costs change, please immediately notify us of the change and the amount so we can update the calculations. One minor change can affect everything, so it s imperative that changes be made once determined Changes can be made via to OTC@afrwholesale.com detailing what items are changing. Updates can be made quickly and results will be resent shortly thereafter 20

21 STAGE 1: STEP 2 (cont.) Send all forms and the appropriate Construction U/W Packet (on AFR s website under the OTC Program) to the Retailer/Builder and borrower where applicable to complete & sign Be sure to instruct them to draw up the new contract based upon the Purchase Agreement Worksheet from your Calculation Results 21

22 STAGE 2: AFR CREDIT UNDERWRITING Submit a full credit package to AFR based upon Calculation Results Loans submitted to AFR for credit approval for the permanent portion of the loan Rates can be locked at anytime and need only to be locked through closing (not through construction) 22

23 ONE-TIME CLOSE (OTC) STAGE 3: CONSTRUCTION UNDERWRITING Once AFR has approved the permanent financing, the correspondent gathers the required items for construction underwriting and submits to the Administrator through the loan center portal Once approved, the correspondent will collect any remaining construction conditions on the Admin s approval and address any outstanding items 23

24 STAGE 3: CLEAR TO CLOSE OTC loans are Cleared to Close once all credit underwriting conditions from AFR and all construction underwriting conditions are cleared from the Administrator. 24

25 STAGE 3: CONSTRUCTION UNDERWRITING STAGE 3: CLOSING CLOSING At the closing the Land Seller or the mortgagee will be paid off/funded There is no initial draw to the Retailer/Builder at the closing before any work is in place After a three business day cooling period, the Builder/Retailer can be reimbursed for any site permit related expense with notification/documentation Your responsibility as a lender is done here Commissions are paid based upon the closing date! 25

26 CONSTRUCTION PHASE POST-CLOSING / CONSTRUCTION BEGINS After closing, construction can begin immediately A Letter of Commencement will be sent to the Builder/Retailer informing them the loan has closed and construction can begin. The letter details how and when to request the draws For manufactured/modular only: provided the home has been built, a factory invoice in place, and acceptable property coverage is in place, the Retailer may request that the factory or floor-plan source be paid the invoice cost of the home as well. This does not count towards the Retailer s three draws Manufactured/Modular Home retailers are allowed up to three draws Site-Built Homes builders can receive up to five draws The Administrator will work directly with the Builder/Retailer for all draws and the collection of final construction related conditions Once again you as the broker/lender are not involved in this process 26

27 CONSTURCTION PHASE Construction Draw Procedures Upon request by the Retailer/Builder for a construction draw, the Administrator will immediately order an inspection of the construction project Upon receipt of the report the Administrator will match the report with the Home Construction Cost Breakdown to determine the draw amount The Administrator will have the funds wired to the settlement agent and simultaneously provide Disbursement Instructions to the Settlement Agent for further disbursement to the Retailer/Builder 27

28 CONSTRUCTION PHASE Interim Draws It s up to the Retailer s/builder s discretion when or if they take the interim draws Line-Item Percentage of Completion Method used to determine draw amounts for site-improvements Interim draws are to be used to pay for site improvements/construction in place. Collateral inspection required when a draw for site improvements/construction in place is requested. The Administrator will order/pay for the collateral inspection For manufactured/modular homes, interim draws can be used to payoff the Manufactured Invoice Cost of the Home (if not paid right after closing) For manufactured/modular homes, no collateral inspection required if paying home only The Administrator will fund up to 80% of the Retailer s Contract Price on manufactured/ modular homes and 90% of the Builder s Contract Price on site-built homes prior to the Final Draw, provided the work is in place 28

29 CONSTRUCTION PHASE: CONSTRUCTION COMPLETE Construction to Permanent Rollover Builder/Retailer to advise the Administrator when the project is complete so the final inspection can be ordered. When all funding requirements have been met and received the administrator will then forward final disbursement instructions to the settlement agent for disbursal of the final draw to the Builder/Retailer and all remaining obligations. The borrower(s) will sign the modification of the first payment of their Note. Once all funds have been fully disbursed, the file is complete. The borrower(s) will begin making their payments on the new date established. 29

30 THE DO S AND DON TS DO DON T Do confirm that your warehouse provider can fund OTC loans. Do set proper expectations regarding turn-times on an OTC loan. These take longer than a normal purchase transaction. Under promise and over-deliver. Don t allow borrowers to be the builders, contractors, or hire their own sub-contractors for their new home s construction, as this is ineligible. Don t allow family members to be the builder/retailer. Must be arm s length transaction. Do consider having a dedicated staff member to be the point on all OTC loans. OTC loans are complex and have many moving parts. Don t let the borrower, builder, or retailer start any construction prior to closing. Don t let the borrower think they can get any funds from the OTC loan. The Borrower s may not receive any funds, reimbursements, or cash back from the transaction. 30

31 COPYRIGHT 2015 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 31

32 AFR UNIVERSITY ARE YOU AFR CERTIFIED? Thank you for participating in today s webinar on One-Time Close (OTC) Construction-To-Permanent Loans! TAKE THE NEXT STEP! We hope that you now have a better understanding of this exciting opportunity to expand your product portfolio. We now offer online testing for you to measure your understanding of this program through AFR University. Upon completion of our online testing for this program, you will be provided feedback on how well you did, and any areas you may need to review. Also with a passing grade, receive your AFR University Certificate for One-Time Close (OTC) Construction-To-Permanent Loans. Take the next step and become AFR Certified! Visit our test portal to take your test and learn more about the benefits of our AFR University certification program. Take me there now! 32

33 ABOUT US AMERICAN FINANCIAL RESOURCES, INC. American Financial Resources, Inc. (AFR) is a national residential mortgage lender dedicated to helping homeowners, home buyers, and mortgage professionals achieve their financing goals by delivering innovative mortgage solutions and an unparalleled customer experience. Based in Parsippany, NJ and established in 1997, we are a Ginnie Mae, Fannie Mae and Freddie Mac Seller/Servicer, FHA Mortgagee, USDA National Lender and VA Automatic Lender. We provide Wholesale and Correspondent mortgage solutions by offering an extensive product catalog with competitive pricing, unique partnership opportunities, and flexible business relationships. We strive to exceed the expectations of our lending partners and nurture healthy, profitable relationships, ultimately providing a simplified mortgage process with the highest levels of customer service. COMPANY HIGHLIGHTS FULL SERVICE MORTGAGE LENDER NATIONWIDE SERVICING WHOLESALE AND CORRESPONDENT CHANNELS DIVERSE DELIVERY OPTIONS INCLUDING FHA, VA, USDA, FANNIE MAE AND FREDDIE MAC RANKED #1 IN 203(k) LENDING FOR SPONSORED ORIGINATIONS* ONE OF THE NATION S LEADING RENOVATION AND MANUFACTURED HOME LENDERS DEDICATED SALES AND OPERATIONS SUPPORT *Neighborhood Watch, US Department of Housing and Urban Development, January 31,

34 CONNECT WITH US AMERICAN FINANCIAL RESOURCES, INC. If you are a mortgage professional new to American Financial Resources, Inc. Wholesale Division (AFR Wholesale), we welcome the opportunity to discuss our programs with you. For our current Lending Partners, we want to hear from you. Please contact us directly with your comments, questions, and feedback. VISIT US AFRWHOLESALE.COM LINKEDIN FOLLOW US CALL US TOLL FREE: FACEBOOK FOLLOW US US OTC@AFRWHOLESALE.COM TWITTER FOLLOW US LIVE CHAT WITH US CLICK TO CHAT VISIT OUR WEBSITE FOR THE FULL DEPARTMENT LIST 34

35 Photography by: [Zlikovec] 123RF.com [Elizabeth Crego] 123RF.com [dinga] 123RF.com [pixelbliss] 123RF.com [Leung Cho Pan] 123RF.com Illustrations by: [David Carillet] 123RF.com 35

36 THANK YOU AFRWHOLESALE.COM