Friday, July 11, 2008

Construction to Perm Loans

Yesterday we met with our mortgage broker (Elly) to sign some papers so we could start the underwriting process to get our construction to perm loan. This is basically a loan that you close on upfront and then modify at the end into a permanent mortgage. The advantage is that you only have to pay closing costs (CC) once.

We have been in discussions with Elly since the beginning of the year, because of having to switch builders in the middle. Originally we were going to have the builder finance the loan, and then close directly from them. In that case we were going to have a regular 30 year and not have to deal with the construction to perm.

In any case, I am a bit concerned that the CC are quite a bit more then the CC on the original good faith. Now there is another wrinkle to this business, because the company that Elly was working for went out of business. Here is the break down:

Credit report:35
Lenders inspection:7575
Underwriting fee:435
Closing fee:270370
Title exam:135135
LP/DU Underwriting:20
Title Insurance:10241308
Name search:35
Recording fee:132
Mortgage Registration:910
Plat Drawing:6060
Courier fee:3030
Tax servicing fee:75
Draw inspection:250
Title search:150
Disbursement fee:250
Modification fee:50
Fee to the loan carrier:2295
Recording fee:178
State Tax:1101

Those are the closing costs associated with the not construction to perm versus our construction to perm. The explanation is that the reg loan had a value of 417k, while the construction to perm is based on a value of 459k. This is because, that is how the bank handles construction to perm loans, they want a higher cap in case of cost overruns. Unfortunately, that means we have to play high fees that are a percentage of the cost. The rest of the increases are because there are higher fees associated with a construction to perm...

So we will see how this all turns out. I think we are on a pretty good trajectory, it will be interesting to see how it all turns out though.

No comments: