Jumbo One Time Close Construction Loan
Building your dream home from the ground up is an exciting journey, but it often comes with its own set of challenges, especially when it comes to financing. Jumbo One Time Close Construction Loans offer a unique and convenient solution for those looking to build their dream home in a luxury market that will exceed the conforming loan limit. In this blog post, we will explore the key features, benefits, and considerations of jumbo one-time close construction loans. If you would like to apply for a Jumbo OTC Construction Loan give the John Thomas Team a call at 302-703-0727 or APPLY ONLINE.
What is a Jumbo One Time Close Construction Loan?
A jumbo one time close construction loan is a specialized mortgage product designed for high-value homes that surpass the conforming loan limits set by Fannie Mae and Freddie Mac. These loans provide a seamless financing solution for building or renovating a luxury home, combining the construction loan and permanent mortgage into a single transaction. The conforming loan limit for 2024 is $750,000 so if you are planning on building a home and will need a loan for $750,000 or less than you would use a Conventional One Time Close Construction Loan but if you need to borrower more than the loan limit you will need to get a Jumbo OTC Construction Loan. If you are Veteran or Active Duty Military then you would want to consider a VA One Time Close Construction Loan as it offers 0% down!
What are the Key Features of Jumbo OTC Construction Loan?
Key Features and Benefits
- Simplified Financing: One of the standout features of jumbo one-time close construction loans is their simplicity. Instead of dealing with two separate loans (a construction loan and a permanent mortgage), borrowers only need to manage one loan from start to finish. This streamlines the process and minimizes the hassle.
- Customizable Loan Terms: Jumbo one-time close construction loans are highly customizable. Borrowers can choose from a variety of terms, interest rates, and down payment options to create a loan that suits their unique financial situation.
- Interest-Only Payments During Construction: During the construction phase of the loan, borrowers typically make interest-only payments. This can significantly reduce the financial burden while your home is being built.
- Fixed-Rate or Adjustable-Rate Options: Borrowers can select between fixed-rate and adjustable-rate mortgage options, allowing them to align their loan terms with their long-term financial goals.
- Avoid Re-qualifying: With a traditional construction loan, you may need to re-qualify for a permanent mortgage once the construction is complete. Jumbo one-time close loans eliminate this step, ensuring a seamless transition from construction to homeownership.
What are the Guidelines for Jumbo One Time Close Construction Loan?
If you are looking to qualify for a Jumbo OTC Construction Loan then you will need to make sure you are going to meet the loan program guidelines outlined below:
- Allowable for Primary Residence or Second Homes Only (No Investment Properties)
- Only One Set of Closing Costs & Fees
- Minimum Credit Score to Apply is 700
- Max LTV for Primary Residence is 85% with minimum Score of 760
- Max LTV for Second Home is 80% with 700 credit Score
- Maximum Debt to Income Ratio is 45%
- Construction Terms include 12, 18 and 24 Months
- Interest Only Payments during Construction
- 7/6 ARM or 10/6 ARM Loan Products
- PITI Reserves Required based on Loan Size
- Can Be Used for Tear-Downs and Major Renovations of Existing Homes
How Do Jumbo One-Time Close Construction Loans Work?
These construction loans work in several key phases outline below:
- Application and Approval: The process starts with an application to a lender who specializes in jumbo one-time close construction loans. Your lender will review your financial situation, credit history, and the details of your construction project to determine your eligibility.
- Construction Phase: Once approved, you’ll work with your lender and a builder to outline the project’s specifics, including costs and timelines. During the construction phase, funds are disbursed as needed to cover construction expenses.
- Transition to Permanent Mortgage: Upon completion of the construction phase, the loan automatically converts into a permanent mortgage. You don’t need to worry about refinancing, and your interest rate remains the same.
- Repayment: From this point forward, you make regular mortgage payments, just like with a standard mortgage. Your interest rate may be fixed or adjustable, depending on the terms of the loan.
What are the Eligible Property Types to Build with a Construction Loan?
The Eligible property types allowed for a Jumbo OTC Close Construction Loan are as follows:
- 1 Unit Site Built Homes
- Detached planned unit development (PUD)
- Detached condominium (site condo); must be fee simple interest for land and dwelling
- Modular Homes
- Tear Downs & Major Renovation
How Do I Apply for a Jumbo OTC Close Construction Loan?
Jumbo one-time close construction loans are an excellent choice for individuals with high-value homes and a dream of building their perfect living space. These loans offer the convenience of combining construction financing and permanent mortgage into a single transaction, simplifying the process and providing a variety of customizable options. However, they also come with higher credit requirements and costs, making it essential to carefully evaluate your financial situation before applying.
If you’re considering building or renovating your dream home in a luxury market, a jumbo one-time close construction loan may be the perfect solution to unlock your vision and turn it into reality. Speak with a trusted mortgage professional on the John Thomas Team with Primary Residential Mortgage to explore your options and embark on your journey towards homeownership by calling us at 302-703-0727 or APPLY ONLINE.