Building Your Maryland Dream Home: A Streamlined Journey with Single Close Construction Loans
Maryland offers a unique chance to craft your ideal living space. While embarking on new construction is a significant commitment, single close construction loans have simplified the process, paving a clearer path to building your dream home.
What is a Single Close Construction Loan in Maryland?
This innovative financing option streamlines funding for your Maryland home construction. It combines the construction loan and permanent mortgage into a single transaction, eliminating the need for two separate approvals. Traditionally, construction requires two loans – one for building and another for the long-term mortgage. A single close construction loan merges these, saving you time and hassle.
Benefits of a Single Close Construction Loan in Maryland:
- Convenience: Borrowers secure both construction funds and the mortgage in one go, avoiding a second closing and managing separate loans.
- Cost-Effectiveness: This model offers consistent loan terms, including interest rates and fees, leading to clear financial expectations throughout construction and repayment.
- Financial Stability: Knowing the loan terms upfront provides stability when planning your dream home.
How Does it Work?
The process resembles a traditional home loan, with some Maryland-specific details that may vary by lender:
- Prequalify: Assess your financial eligibility by having your credit score, income, and debt-to-income ratio reviewed to estimate your borrowing potential.
- Loan Application: After prequalification, choose a lender and submit a detailed application with financial documentation and construction plans.
- Construction Loan Closing: Upon approval, finalize the loan agreement, pay closing fees, and secure construction insurance.
- Construction Phase: Construction commences with the lender disbursing funds to the builder in stages based on completed milestones and approved inspections.
- Conversion to Permanent Mortgage: Following construction, the loan converts to a permanent mortgage through another closing where you finalize the long-term loan terms.
- Repayment: Begin making regular monthly mortgage payments as per your loan agreement until the balance is paid off.
Single Close Construction Loan Options in Maryland:
Building your dream home in Maryland can be a reality with various single close construction loan options available. Each program offers unique benefits and eligibility requirements. Let's explore some of the popular choices:
USDA Single Close Construction Loan:
This program caters to borrowers building in eligible rural areas of Maryland. It combines construction financing and permanent financing into a single, streamlined loan. The USDA offers competitive interest rates and potentially lower down payments compared to conventional loans, making it an attractive option for rural homebuyers. However, eligibility is based on income limits and property location.
VA Single Close Construction Loan:
This government-backed program is a fantastic option for veterans and active military personnel building their dream home in Maryland. To qualify, you'll need a valid Certificate of Eligibility (COE) from the Department of Veterans Affairs. The VA offers significant advantages, including:
- Minimal down payment requirements, often allowing zero down payment.
- Competitive interest rates.
- More relaxed credit score requirements compared to conventional loans.
FHA Single Close Construction Loan:
The Federal Housing Administration (FHA) offers a single close construction loan option suitable for new construction or significant renovations in Maryland. This program streamlines the financing process and may be a good fit for borrowers with lower credit scores or limited down payment funds. The FHA offers:
- More lenient credit score requirements compared to conventional loans.
- Lower minimum down payment requirements.
Fannie Mae HomeReady Single Close Construction Loan:
Fannie Mae's HomeReady program provides a single close construction loan option in Maryland geared towards first-time homebuyers and borrowers in underserved communities. This program offers:
- Competitive interest rates.
- Flexible down payment options, allowing for down payments as low as 3% of the total project cost.
Single Close Construction Loan FAQs
Below is a compilation of frequently asked questions regarding single close construction loans. These questions cover various aspects of the loan process, eligibility requirements, benefits, and other key details. Familiarizing yourself with these commonly asked questions can help you gain a better understanding of single close construction loans and make informed decisions when considering this financing option.
What type of property can I finance with a single close construction loan?
Single close construction loans apply to a wide range of property types. When you connect with us, we’ll discuss whether your property and build type will qualify.
Below are common property types we’re able to finance with single close construction loans:
Single family residences
Owner occupied
Modular
Manufactured
Site built
Stick built
Doublewide
Factory built
“Build on your lot”
Land home
Barndominiums
Post Frame
Do I need good credit to qualify for a single close construction loan?
Credit is one factor used to decide how much you can finance with a single close construction loan.
The minimum requirements vary depending on the loan program. In many cases, a credit score of 640 or higher is often best. A credit score of 700 or above is considered low risk, while a score of 800 to 850 is exceptional.
We will examine your entire financial outlook and work with you to find a loan solution that meets your needs, considering many factors including your credit score, current income, and investments.
Do I need a down payment for a single close construction loan?
Whether you need a down payment for your loan depends on the specific loan program you decide to use.
Our single close programs offer down payments anywhere from 0-3.5% to a maximum of 5%. This is a small fraction of what other lenders typically ask for with traditional construction loans, which require a down payment of around 20% to get the best loan terms.
How do single close construction loan interest rates compare to other construction loans?
Interest rates for single close construction loans vary based on a variety of factors including your credit score, the location where you want to build, your loan type, and loan amount.
To know what interest rate your situation would qualify for, get in touch with one of our loan advisors for more specific information.
What happens with financing after closing a single close construction loan?
Most of the lending process will be handled for you behind the scenes by our team and your builder. You’ll just want to be ready to discuss your needs with your builder and read contracts closely at each stage of the process. We’re always here to help.
With a single close construction loan, you receive both an interim construction loan and a 30-year permanent loan at the same time. You get a single promissory note and one deed of trust. You’ll sign the 30-year amortizing promissory note at closing.
Once the promissory note is signed, any liens on the land will be automatically paid off. A draw amount will be made available to the builder so construction can start right away.
When the project is complete, you’ll receive a loan modification to amend the date for first payment. After the loan modification is signed, the 30-year amortizing loan works like any other home loan with fixed interest rates.
How does my lender get involved with the construction of my new home?
We have an in-house single close construction management team. Using our years of experience and home-building expertise, our experts review and approve documentation from every stage of construction.
This includes project budget and timeline, planning and specifications, permits and inspection, and building code best practices.
At the start, you’ll want to find and engage the builder of your choice as long as they meet the quality standards for our program. Our builder vetting process ensures that all builders accepted into our program have a sterling record of on-time completion for their home projects. Quality, safety, and efficiency are our top priorities.
Our team will help keep your project on track every step of the way. This allows potential problems to be dealt with before they can turn into major delays.
Our completely hands-free building process means you never need to worry about applying for building permits or arranging inspections as your construction takes shape. It is all handled for you. The documentation you might need in the future is centralized all in one place.
Are there other names for single close construction loans?
Single close construction loans have other names as well.
As you work with builders and lenders, you might hear single close construction loans referred to as single close loans, construction-to-perm loans, one-time close loans, construction conversion loans, CTP loans, or even all-in-one loans.
