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Approval Process
The approval of a construction loan is based upon many factors including financial stability, builder expertise, the home's cost and specifications, and the borrower's ability to refinance into a mortgage. All construction loans need to be refinanced into a traditional mortgage, whether it be a Conventional, FHA or VA mortgage. For this reason the construction loan approval process actually begins with the mortgage approval. The general approval process stages include:
  1. Land: Homeowner identifies the land upon which the home will be built
  2. Builder: Homeowner researches floor plans, interviews builders and obtains proposals to identify the cost to build
  3. Mortgage Pre-Qualification: Borrower completes a mortgage application. Credit is pulled and based upon the stated income provided by the applicant, a preliminary debt-to-income ratio is calculated
  4. Mortgage Pre-Approval: Borrower provides supporting documentation, including pay stubs, tax returns, W2 statements, land and build contracts. Mortgage lender will order a proposed-construction appraisal to confirm the value of the home
  5. Mortgage Conditional Approval: Mortgage lender submits the loan file to the wholesale mortgage lender and obtains an underwritten conditional approval
  6. Construction Loan Processing: Mortgage lender provides the loan file to Construction Financial Services, Inc. for processing
  7. Construction Loan Underwriting: Once all documentation is received, the loan file is sent to underwriting for analysis
  8. Construction Loan Approval: Borrower and Builder sign loan documents with the Title Company to "close" the construction loan
  9. Build: Permits, insurance and Forms Survey are obtained. Builder commences in the construction of the home.
  10. Refinance into Mortgage: When countertops and cabinets are being installed, borrower updates pay stubs and bank statements with the mortgage lender. The mortgage file is updated, the final inspection and appraisal are obtained, and the borrower refinances the construction loan into a traditional mortgage.
Construction Financial Services, Inc.
18568 Forty Six Parkway, Suite 3002, Spring Branch, TX  78070
Office:  (830) 438-4558
Copyright © 2019 NMLS # 866625
Lenders are required to provide the "Your Home Loan Toolkit", which has been provided by the Consumer Finance Protection Bureau created to comply with federal law pursuant to 12 U.S.C. 2604, 12 CFR 1024.6, and 12 CFR 1026.19(g). This is for all loan transactions effective 10/3/2015. http://files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf
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