Building a Home

What is a Construction Loan?
A construction loan is used to finance the building or major remodel of your home. Once the construction is complete, your loan is then converted into your new mortgage. Construction loans are designed to make the loan process as smooth as possible, providing you with a fluid loan transition before and after the construction process.

What are my loan options?
We currently offer two loan options for borrowers in the construction stage of their homebuying journey. Since all situations are unique to each homeowner, we encourage you to contact us so we can help you find an options that is best for your budget and home ownership goals.

• CONSTRUCTION-PERMANENT LOAN
  A construction-permanent loan is designed to fund the expenses inccurred during the building process, and convert into a permanent mortgage once the construction on your home is complete. With a one-time closing, our construction-permanent loan eliminates the additional closing costs and time you would otherwise spend creating a new mortgage.
  
  How it works: During the first 12 months, your builder will make draws as work is completed. Your down payment funds will be used first in the draw process. You will be required to make regular monthly payments of principle and interest following the completion of your construction period (12 months) or after the final draw to your builder has been made and the property is 100% complete.
  • 5/1 ARM, with a term up to 30 years
  • Interest only for the first 12 months
  • Option to refinance

• CONSTRUCTION-BRIDGE LOAN
  A construction-bridge loan is a unique solution that allows you to use the equity in your current home as a down payment for your new home. This loan type is best suited for those wanting to stay in their current home while construction is being completed on their new home. It is also a great solution for those who are finding it difficult to fit their current budget with the project timeline, or if down payment requirements exceed their available liquid assets.
  
  How it works: The equity in your existing home and the subject value of your new home is used as collateral to fund the construction of your new home. After your current home sells and construction is completed on your new home, we will refinance your new home on a loan plan that works best for you. Draws will be made over the 12 month period, increasing your interest payment over time. We pay off any exisitng liens on your current home at closing.
  • 1 year ARM, with a term up to 30 years
  • Interest only for the first 12 months
  • Option to refinance

How does the draw process work?

DrawsWe have a simple draw process that is designed to meet the needs of your builder, and you. In general, a draw is simply the process of withdrawing funds from your loan and using them as payment for the various stages of construction. During the first 12 months, your builder will make draws as work is completed. Your down payment funds will be used first in the draw process.These funds will not be released until we have completed an inspection to verifiy that the work has been completed. The inspector is typically the appraiser that has been assigned to your project. Cinfed will maintain the percentage drawn from the construction loan and match the percentage of work that is complete. Keeping this in balance protects all parties involved.

Draw RequestsThe builder will request draws as work is completed. The only time a member will need to request a draw, is if there is work outside of the builder’s contract/scope of work. Work outside of the builder’s contract/scope will need to be addressed before your loan closing. An affidavit will be signed by the builder and homeowner (provided by Cinfed). Each draw will have a Fee of up to $100. Any draw fees not used can be reimbursed after the final draw is made. A title update will be completed for each draw to verify a clear title is being maintained. Builders can find additional information and required documents for draw requests, here. Members that will have work completed by someone other than the builder can find more information here.

EscrowWe do not offer to escrow for taxes and insurance on construction loans. The reason for this is we will not have a fully assessed tax bill yet, and your insurance policy is likely to change after your home is completed. We are happy to set up an escrow account at a later date when we have a fully assessed tax bill. In the mean time, taxes and insurance will need to be paid by you when they are due.

How should I get started?

We will start with gathering the information we need from you to determine an amount you are comfortable borrowing and submit an application for pre-qualification. Once you are pre-qualified, the process to select a builder can begin if it has not already. A formal loan application is made once we have the contract to build, plans for construction, and a cost estimate regarding any additional improvements to the lot outside of the builder’s scope of work.