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You'll just have to pay closing costs once when you combine construction costs and long-term financing with the Construction/Permanent Loan. All you have to do is:
- Apply when you have a contract with a builder.
- Close within 60 days of application.
- Make interest-only payments for up to 12 months.
- Pay interest only on money used during construction.*
- Let CEFCU handle payments on things like materials.
- Use the equity in your lot as part of a down payment.
You can choose a Fixed-Rate, or Adjustable-Rate mortgage. After 12 months, the Permanent Loan payments begin.
Lock your interest rate for up to 12 months while your home is being built. Then you can enjoy that same rate for your full Mortgage term.
*Up to 12 Months
Choosing the Completion Loan is as easy as one, two, three! One, lock your interest rate for up to six months while your home is being built. Two, apply when you have a contract with a builder. Three, close once your home is completed. When you close on your home, the Completion Loan will either pay off the builder or your Construction Loan.
- If my down payment funds are in a CEFCU account, can they remain there until the builder needs paid?
No, your funds will need to be available the day of closing. Be sure to allow adequate time to access any funds.
- What is the minimum down payment required on a Construction Loan?
CEFCU loans up to 90% on Construction loans, so a minimum of 10% is required for the down payment, subject to Private Mortgage Insurance (PMI) approval. However, a 20% down payment may be required if the construction of the home will not be completed in 12 months.
- What is the difference between a Completion Loan and a Construction/Permanent Loan?
A Completion Loan allows you to lock your interest rate for up to six months while your home is being built. When you close on your home, the Completion Loan will either pay off the builder or your Construction Loan.
The Construction/Permanent Loan allows you to lock your interest rate and make interest-only payments for up to 12 months. During the construction, disbursements will be made to the builder or title company. After the construction is complete, the Permanent Loan payments will begin for the term you selected.
When you apply for a CEFCU Construction Loan and pay a $350 fee**, you can lock your rate for twelve months while your home is being built.
- Lock your rate up to 14 business days before your application appointment.
- Continue with the same rate for your full Mortgage term.
If rates go down between the time you apply and your closing, you can pay a non-refundable $350 re-lock fee to get the lower rate. You can re-lock as often as you'd like, but the re-lock fee must be paid each time.
**This fee is not applied toward closing costs, and re-locking may affect or delay your closing date.
Great news! If your final payout is completed within an agreed upon time period, you could receive a rate reduction.
- Within six months:
0.375% rate reduction
- Within nine months:
0.25% rate reduction
- Nine+ months:
NO rate reduction
Builder's Risk Insurance
Building sites are vulnerable to vandalism, material theft, and injury to trespassers. Neither the builder's insurance policy nor homeowner's insurance cover these types of risks.
A Builder's Risk Policy* covers the materials and construction site for theft, loss, or liability. Before closing, you will need this coverage. Your builder may provide this coverage, or you can check with your insurance agent.
When your home is complete, contact your insurance company to convert the Builder's Risk Policy to a homeowner's policy.
*It may be necessary to show proof of insurance to comply with local city, county, and/or state building codes.
After your Construction Loan has closed, funds are placed in a construction escrow. These funds are then used to make payments on materials and work done on your home. You only pay interest on loan funds as they are used.
Disbursements are usually made at key stages**, such as:
- Foundation completion
- Framing with roof completion
- Plaster/drywall completion
- Home completion
If there are not enough funds in the escrow, you may need to add funds from a source other than the loan or provide proof of payment to the builder.
When your home is done remaining escrow funds can be applied either to the principal loan balance or used to pay for additional home improvements.
**Other options are available. Additional costs may apply.