Welcome to Northwest and congratulations on your decision to build a new home.

Transcription

1 Welcome to Northwest and congratulations on your decision to build a new home.

2 Let s Get Started Welcome to Northwest and congratulations on your decision to build your new home! Please take some time to review this packet prior to applying for your loan and be sure to work with our construction experts, who can be reached at , for any questions you may have. Some things to think about early: Application. The more thorough and accurate your application is, the smoother the rest of the loan should go. Having completed construction information is essential to getting your construction process off on the right foot. Accepted Builder. All builders must be accepted by Northwest Bank. Be sure to discuss who you intend to use as your builder with your construction expert. Many builders are already accepted and you will not need to do anything. Others that need to be accepted must complete a builder acceptance application and submit it with supporting documentation as indicated in the application. Property Information. We ll need to know the answers to some important questions regarding the lot you will be building on. For example, do you currently own the lot? And, if so, are there any liens against it? We ll also need to know if the property is on an existing or proposed subdivision, and if the utilities are public or private. By being prepared and having your answers ready before speaking with us, you ll speed up the loan application and approval process. Property Taxes. Talk to your local tax assessment office prior to applying to see if they are able to provide you with an idea of what your annual property taxes will be. The last thing you want is a surprise coming in the mail when your property taxes are much higher than you were anticipating. Estimated taxes can be calculated by taking the anticipated value and multiplying it by the total millage rate for your city/township. Appraisal. Detailed contracts, specs, approved building plans/blueprints and bids/estimates are required and will aid the appraiser when determining the final value of your home. This will also enable the appraiser to prepare a more accurate appraisal by locating comparable sales most similar to your new home. Interest Rate. Unlike most lenders, we offer a single loan closing with our Construction Loan. What that means to you is your rate is fixed from the moment you close your loan and you won t have the added expense of closing a loan for the second time. Survey. To ensure your new home is within your property boundaries, Northwest Bank requires borrowers to provide a survey of their property. It will be your responsibility to have this survey completed at the time the footers/foundation are placed on the property, but before framing is complete. If you recently have had a survey completed on your property, an affidavit of no change or a new survey will need to be completed by a registered surveyor, once the footers/foundation has been placed.

3 Construction or Purchase/Refinance with Improvements Process Checklist Pages 2 and 3 provide a process checklist that you can use to follow along with the origination and completion of your home. Application Process Approval/Acceptance Process Draw Schedules Collect the information listed in the Application Checklist on pages 4 and 5 of this packet. If your builder is not on Northwest s accepted builder list, please provide your builder s name and telephone number so your Northwest lending representative may contact your builder to begin the builder acceptance process. Collect required documents from your builder, including a fully executed construction contract, final plans, specs and drawings (signed and dated by you and the builder) and any other construction related items. These need to be provided electronically to Northwest. Provide information on your land (copy of deed, if owned, or copy of fully executed sales agreement, if being purchased). Make an appointment with your Northwest lending representative to complete your mortgage loan application. Your completed loan application with all supporting documents is submitted for review and financing approval. Your builder s application is submitted for review and acceptance (if applicable). Please note that your final plans and information on water and/or sewer tap fees are required before loan closing. Once all submitted information has been reviewed and approved closing is scheduled. Please note: no work on the property should begin until the loan has closed. Northwest offers flexible draw schedules to ensure proper payment to your builder for work that has been completed. Only Northwest approved draw schedules are permitted. Your builder should review the draw schedule to make sure they understand it and have any questions addressed before loan closing to avoid misunderstandings during the construction of your home. Any proposed changes made to a draw schedule post-closing will require approval by Northwest. Construction Draw Process These steps are repeated until the construction of your home is completed. Completion of Home Permanent Financing You or your builder provides your Northwest construction specialist with a copy of the building permit and foundation survey prior to payment of the first draw. You or your builder request a draw by ing the completed Inspection Request Form to const.disbursement@northwest.com. Northwest will order a property inspection from the appraiser or inspector to determine the work completed. A title bring-down will also be ordered in NY, OH and MD to confirm no intervening liens have been filed since the last disbursement. Upon receipt of the inspection report, Northwest determines the amount of the draw based on the work completed and the approved disbursement schedule. Northwest prepares the disbursement in the form of an electronic payment to your builder. Prior to the payment being made you will sign a Direct Construction Disbursement Authorization form permitting Northwest to pay the builder directly. You or your builder requests the final disbursement of construction funds and provides Northwest with a copy of the Certificate of Occupancy (if applicable in your area). Northwest orders the final inspection and completion certificate. Northwest issues the final disbursement of construction funds. At the conclusion of the construction period (normally 6 months), the loan will automatically convert to the permanent phase. This includes the beginning of payments for principal, interest and escrow. The construction phase is concluded with the final interest billing. PLEASE NOTE: In this event, at the conclusion of the construction period, any remaining construction funds will be disbursed from the loan and placed in an interest-bearing construction escrow account. Disbursements will be made from this account until construction is complete. This will allow the construction loan to convert to the permanent phase and the regular mortgage payments for total loan principal, interest and escrow to begin. 2

4 Construction or Purchase/Refinance with Improvements Application Checklist To expedite the application process, please provide the following: Income Construction Documents Do you have any W-2 income? Do you earn Commission income? Do you have Rental income? Salaried or hourly employees W-2 wage earners and overtime. 1 month of your most recent paystubs with year-to-date income and employee/employer information W-2 statements for past 2 years 1 month of your most recent paystubs with year-to-date income and employee/employer information Signed personal tax returns for the past 2 years, with all schedules (if commission is more than 25% of your total income) Signed personal tax returns for the past 2 years, with all schedules Recent lease agreements OR most recent 12 months cancelled checks from renter For construction loans and purchase/refinance loans with improvements Builder Acceptance Documentation (if not on Northwest s current accepted contractor list) Building permit, if applicable A copy of the signed purchase agreement for the lot/subject property (if not already owned) OR a copy of the deed (if subject property is already owned) Property tax information for subject property (if already owned) A construction contract and specs signed by the borrower(s) and the contractor Two copies of the blueprints/building plans signed by the borrower(s) and the contractor A copy of the Northwest building specifications or approved contractor specification signed by the borrower(s) and the contractor Contract(s) for all estimates outside of the construction contract (i.e. well, septic, electrical hookup, driveway, etc.) signed by contractor and borrowers A septic system percolation test (if applicable) Do you receive a pension or draw on retirement income (401k)? Do you receive Social Security/SSI? Do you receive Disability income? Do you receive Interest income? Self employed income: Do you own 25% or more of any business? Bank or brokerage statements (all pages) for the past 2 months OR most recent quarter documenting history of receipt AND Signed personal tax returns for the past year, with all schedules, and 1099 from most recent year OR Pension award letter (if applicable) or letter from the pension plan administrator verifying monthly payments and duration of payment Most current award letter (all pages) 2 months of bank statements showing receipt of Social Security income Most current benefits awards letter (all pages) 2 months of bank statements showing receipt of Social Security income Interest dividend, trust or other income that will be used to qualify your loan Please contact your Northwest mortgage banker for document requirements. Signed federal personal tax returns for the past 2 years, with all schedules If Applicable: Signed federal business tax returns for the past 2 years, with all schedules K-1 form if partnership or S Corporation Year-to-date profit loss statement AND current balance sheet Please note: If tax returns have not been filed for most current year, and it is after tax day, April 15th,or if today s date is more than 120 days after the business fiscal year end, add a copy of the executed extension document. Debts Do you have any debts not on your credit report? Refinancing primary residence? Own additional properties? Assets For any bank or investment assets that will be used for the qualification of this loan Will a cash gift be used for down payment or closing costs? Borrowers who rent (all locations rented in the past 2 years) include: Property address Name and address of landlord Monthly rent Homeowner s insurance declaration page Most recent school, county and township tax bills Homeowner Association fees (if applicable) Property address(es) Property values Most recent tax bills for school, county and township on currently owned property Homeowner s insurance declaration pages Checking, IRAs, CDs, stocks, bonds, 401(k), SEP/Keogh accounts, cash value of insurance policy. Bank/ institution statements (all pages) for the past 2 months or most recent quarter (all pages) Letter from a family member indicating the amount and purpose of gift and that gift is not expected to be repaid Receipt (like a bank statement) showing the gift has been deposited If the gift has not yet been received but will be used to qualify for the loan, you ll still need to provide the documents above prior to closing. PLEASE NOTE: Alimony, child support, separate maintenance income need not be revealed if borrower/co-borrower do not wish to have it considered for repayment of loan. PLEASE NOTE: Borrower/co-borrower must provide documentation of any debt not on the credit report but disclosed on the application. Please be advised that additional supporting documentation may be required during the application process.

5 Builder Acceptance Process Checklist Northwest requires that all builders be accepted within 10 days after your completed loan application is submitted for underwriting. If your builder is not on Northwest s Accepted Builder List your Northwest construction expert will assist with the builder application and acceptance process. Your builder s acceptance will be a condition that must be met prior to loan approval. Northwest reserves the right to not accept a borrower s recommendation of a builder based on the information provided from the builder. Northwest s requirements for builder acceptance include the following: Completion of the Northwest Builder Acceptance Application and all supporting documentation (includes banking information for electronic payment) Evidence builder is licensed The builder must operate a full-time business of building/remodeling homes All trade accounts must be current The builder must provide references from both clients and material suppliers Maintain proper and adequate insurance coverage (general liability and workman s compensation)

6 Draw Procedures Northwest will disburse construction funds based on the inspection report completed by the appraiser as it relates to the disbursement schedule. These terms will be agreed upon by you and your contractor prior to closing. Please see pages 10 and 11 for copies of our disbursement schedules. Sample Inspection Request Form Below is an example of the form you ll be asked to complete when a draw is needed. Please note: It will be your responsibility to provide funds for any change orders, upgrades or cost over runs. Northwest must be notified of any of these changes. Please note: Northwest does not disburse construction funds to order materials, to pay for change orders or in advance of work being completed. completed form to: const.disbursement@northwest.com With the origination of your loan, there are up to six inspection draws at 100 each for a total of 600 collected at closing. Each additional draw will result in a 100 inspection fee charged to you at the time the order is submitted. Six bring-down charges for each draw will be collected by the title company at closing for loans in NY, OH and MD. First Draw You or your builder will be required to provide the following items: Copy of the foundation survey Copy of building permit Date: Borrower(s) Name: 6/1/20XX Property Address: 100 Liberty Street, Warren, PA Detailed Description of Items to Inspect: 8 Steps to obtain a construction draw: 1. You or your builder requests a draw by ing the completed Inspection Request Form to const.disbursement@northwest.com (have your building permit and survey (if applicable) ready to send to Northwest at this time). 2. Northwest orders an inspection from the appraiser. The inspection will be completed within three business days of submitting the request (a title bringdown is ordered at this time for loans in NY and OH). 3. Upon receipt of the inspection report (and title bring down, if required), your Northwest lending representative will determine the amount of the draw based on the work completed as it relates to the disbursement schedule. 4. Funds will be disbursed via electronic payment (ACH). You will need to execute a Direct Construction Disbursement Authorization form prior to the disbursement. This is not an authorization for the entire construction period; an authorization must be completed for each draw request. Funds will be disbursed within 24 hours of receipt of the completed inspection report and executed construction disbursement authorization form. Final Draw You or your builder will be required to provide the following items: Certificate of Occupancy It is very important that the borrower is aware of the following Uniform Construction Code requirement: No dwelling or building may be occupied until all inspections have been approved, all state and local requirements are met and the Certificate of Occupancy has been issued. Failure to follow these requirements is a violation of the Uniform Construction Code and subject to penalties. These inspections are performed by the Labor & Industry Inspector NOT Northwest. Final inspection and completion certificate (Northwest will order and provide) Please inspect rough grade, footers, underground utilities, and foundation. (May provide additional information as necessary) Contact to Schedule Inspection: Name Phone Additional Comments: (borrower/builder) Please contact between 10:00 a.m. and 12:30 p.m. on Tuesday or Wednesday to schedule the inspection. Please see attached footer determination and building permit. Northwest Bank is Member FDIC.

7 Sample Disbursement Schedule Modular Build Sample Disbursement Schedule Custom Build Sample Schedule: The disbursement schedule below is an example of the standard schedule based on a construction loan for a modular build. After review with a contractor, any change you would like to make can be reviewed by our construction team prior to finalizing the disbursement schedule for signature. Contact us with questions. Sample Schedule: The disbursement schedule below is an example of the standard schedule based on a construction loan for a custom build. After review with a contractor, any change you would like to make can be reviewed by our construction team prior to finalizing the disbursement schedule for signature. Contact us with questions. Total Escrowed Funds: Stages/Description (No Partial Disbursements permitted) Remaining Balance: to be disbursed as outlined below 1 Amount paid prior to construction to order home 2 Upon Completion of Well (if applicable) The results of a satisfactory well test confirming both water purity and flow must be presented to the lender prior to disbursements. Includes Tap-in Fee (if applicable) 3 Upon Completion of Septic System (if applicable) Includes septic tank, dry well, leach field and sand mound, if applicable. The results of a satisfactory perk test must be presented to the lender prior to any loan disbursements. Includes Tap-in Fee (if applicable) Upon Completion of Foundation* Includes Site Preparation/Permits, Clearing/Rough Grading, Excavation, Footers, Walls, Water Proofing and French Drains. ---Ready for house to be set--- 7 Upon Completion of Delivery of Unit to Subject Property Site & Set on foundation Satisfactory installation of the unit on the Borrower s foundation. 8 Upon Completion of the following Work* Includes: Basement floor cemented (if applicable), utility hook-ups (including furnace & heating ducts, final wiring and final plumbing) and complete unit assembly. 9 Final Completion* Includes: garage (if applicable), porch(es)/stoop(s) (if applicable), rough grading, and borrower s satisfaction and the certificate of occupancy issued. Amount to be disbursed Remaining balance: Total escrowed funds: to be disbursed on a percentage basis % Adj Std Completion of satisfactory water 1 purity and flow prior to disbursement of tap in fee paid 2 3 Completion of permit/satisfactory perk test prior to disbursement of tap in fee paid Extras: Ex: fireplace, exterior stone, permits, etc. 4 Site preparation-clearing/rough grading Foundation* Floor framing or slab Framing* Sheathing Roof a. Rafters/trusses* 5.0 framing b. Sheathing* Interior stairs Windows Exterior doors a. House doors 1.0 b. Garage doors Roof shingles Plumbing (roughed-in) Electrical (roughed-in) Insulation - walls and ceilings Basement floor Heating a. Duct work* 1.0 b. Heat unit Interior walls a. Drywall installed* 4.0 b. Taped, sanded and finished Interior painting/wallpapering Exterior a. Siding/fascia/soffit 4.0 b. Gutters/down spouts Kitchen and bath a. Cabinets 5.5 b. Countertops 1.5 a. Baseboards Wood Trim b. Windows 1.5 c. Door frames Interior doors (including hardware) 2.0 Plumbing finish (including all fixtures 25 kitchen and bath(s))* 2.0 Electrical finish(including all outlets and 26 overhead fixtures)* Floor coverings a. Ceramic/vinyl/wood 3.0 b. Carpeting Driveway, leadwalk(s), etc Stoop(s), porch(es), patio(s), deck(s), etc Finish grading Final draw* 10.0 Total % to date Note: A draw inspection must be performed prior to each disbursement. Additional draw inspections are per visit. *Requires satisfactory inspection by an authorized Construction Code Official prior to disbursement. (PA only). All disbursements are subject to an inspection and approval by an authorized representative of Northwest Bank. The representative is not an architect, engineer or construction specialist, and the Bank assumes no liability for the manner or structural quality of the work performed. *Requires satisfactory inspection by an authorized Construction Code Official prior to disbursement. (PA only) All disbursements are subject to an inspection and approval by an authorized representative of Northwest Bank. The representative is not an architect, engineer or construction specialist, and the Bank assumes no liability for the manner or structural quality of the work performed. The assignment of any rights for funds due under this contract shall not be binding upon Northwest Bank unless consent in writing is obtained from the Bank before such assignment(s) are executed. The acceptance by the undersigned of the above proceeds represents an agreement to the terms of disbursement as herein stated or modified.northwest Bank is Member FDIC. 11

8 Repayment Periods Interest Billings Permanent Financing After your loan closing, the construction period will begin. The length of this period depends on what type of home you are building, but is typically four to six months. Your monthly payment during the construction phase will be any interest that has accrued on the funds that have been disbursed from your loan, plus any escrow payment (taxes, insurance, etc.). Example: If you have 100,000 of work disbursed on your loan at an interest rate of 5%, your interest payment would be for that time period. Remember that you will be billed for escrow items (taxes, insurance and/or mortgage insurance) with the first billing cycle after the loan closes, even if construction loan funds have not been disbursed. The interest/escrow billing will continue through the construction period. A common question is, What happens if my six month construction period expires and my house isn t complete yet? In this event, at the conclusion of the construction period, any remaining construction funds will be disbursed from the loan and placed in an interest-bearing construction escrow account which Northwest controls. Disbursements will be made from this account until construction is complete. This will allow the construction loan to convert to the permanent phase and the regular mortgage payments for total loan principal, interest and escrow to begin. At the conclusion of your construction period, your Permanent Financing phase begins. This is the part of your construction loan that includes principal repayment. The interest rate during both phases (construction and permanent) is the same with Northwest. When the permanent financing begins, you will make payments of principal, interest and escrow items (taxes, insurance and/or mortgage insurance if applicable). After construction of a new home is complete, many customers are in a position to sell a previous home. One important feature of construction loans at Northwest is the ability to modify your loan after a substantial principal payment. If, after the sale of your previous home, you would like to apply some or all of the proceeds to the balance of your new construction loan, we can help you do that. We can apply the payment to principal, and then re-amortize the remaining balance over the remaining term of your mortgage. This generally allows your mortgage payment to be reduced. There is a nominal fee for this service. Please ask your Northwest representative for details. Remember, if you have a change of address due to temporary housing, please notify your Northwest lending representative immediately. 12

9 Member FDIC Rev. 4/2017