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Energy Efficient Mortgages (EEMs) are loans that include funds to cover the cost of making energy efficiency improvements to a dwelling.

August 29th , 2014

If you build it, he will come….I love this line from the movie Field of Dreams! Of course, it could just be I love to see Kevin Costner!  It’s a feel good movie that teaches us to have a little faith in believing in the impossible. Sometimes finding the right home to buy can seem impossible.

Home buyers typically have an idea of what they want in home to meet their particular wants/needs. After diligently searching and taking that Realtor from House A to House Z, what if their “perfect “ house just doesn’t exist in the current market?   Enter the variety of options called Construction to Permanent lending, or CP for short.  These programs offer “one time close” that includes the construction of the home and the permanent loan upon completion.

Buyers can find the house that meets their family dynamic by choosing a lot and a builder to construct their dream home.  With a CP mortgage,  a buyer actually obtains the construction loan and is able to pay the builder thru draws at each stage of construction.  This program has gained in popularity as the housing sector recovers from the difficulty many good builders faced during the economic disaster of the past few years.  Builders with significant credit damage during this time found it difficult to obtain financing for speculative construction and may need a buyer to obtain the construction loan.  In addition, banks have been more conservative in the amount they are willing to lend even the financially strong builder so that a repeat of large tracks of proposed construction sites that look like ghost towns doesn’t reoccur.  Banks that do have these properties now in their REO portfolios are willing to work with buyers more readily to revitalize these neighborhoods. The CP loan becomes a win-win for all involved.

Lenders that offer these products normally do so with Conventional loans under fixed or adjustable rate with a loan to value of 80 – 90%. (Some may offer interest only type loans, but those are rarer given the conservative nature of lending today).   More experienced lenders may also offer CP loans under the  Veteran Administration home loan programs which may allow for 100% loan to value.  Lenders offer CP financing when a lot is being purchased at the same time or when a borrower might already own the land on which they want to construct their new home. Either way, the “one time close” can be a significant cost savings for closing costs that normally would occur twice. Choosing an experienced construction lender is important to the success of this process and a buyer should shop not only based on rate and terms, but on the history of construction lending in the community. A good lender will have familiarity with reputable local builders and can help the borrower become more comfortable with the process of choosing a builder. More than anything, shop for experience in the lender and the builder!

Whether you own your lot or find one in a neighborhood you want to live in, the CP loan program can help you obtain the home you want, where you want it and with those particular upgrades that make your family happy. So if you believe in the impossible, the incredible can come true! Even if Kevin Costner is too busy to help build your home!

 Call us to find out about your mortgage options! Call us today!

Posted by Pam Woodall

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