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At Vectra Bank® we have the knowledge and experience to help you find the right program to build your dream home. Whether it's your first home or your vacation home, we can help make financing your dream a reality.
Our One–Time Construction Permanent program makes the decision to choose Vectra Bank an easy one.
Did you know? Construction Permanent is also referred to as: CP, One-Time or OTC.
As the homeowner, you will make a lot of decisions about your new home. Choosing the right builder will help ensure the successful completion of the project and you'll be able to enjoy the experience of building your dream home.
It is the Borrower's sole responsibility to investigate and choose the builder. Vectra Bank's acceptance of your builder is not an endorsement of the builder.
We believe the more informed you are, the more prepared you are to make the right decision for you and your project. Here are a few recommendations when choosing a builder:
Vectra Bank requires all builders to go through our review process to determine if our minimum builder standards are met. Acceptance by Vectra Bank is not an endorsement of the builder.
You've probably already spent a lot of time thinking about your dream home. You may have already met with a builder and selected your plans. Your project is starting to come together. Now you are ready to apply for the mortgage that will make all this possible. At Vectra Bank, we will work hard to make the application process easy and convenient for you.
How do I start the application process?
Contact your local Vectra Bank Mortgage Professional or to find the nearestVectra Bank Branch.
What can I include in my loan amount?
The following project costs may be included in the transaction:
What project information will my loan officer need?
Once you have provided to Vectra your "intent to proceed" with the OTC transaction, documentation will be required from you to process your mortgage loan.
Change in Plans
The plans and specifications cannot be changed after they are provided to us, especially after the appraisal has been completed. Changes may affect the value.
Conflict in Terms
In the event of a conflict between the building contract and our terms, we will follow our terms, regardless of whether we address or acknowledge the conflict.
We offer construction phases of either 12 or 24 months to fit different types of projects. It's up to you to select the right amount of time to complete the project.
When building a home, the borrower is responsible to provide certain insurance and to ensure that their builder is sufficiently covered.
Below is a list of standard insurance coverages.
Once your loan is approved, you are ready to close. The closing is an important part of the loan process.
Borrower and Builder Attend Closing
The Borrower and the Builder attend the closing to sign the required documentation.
Down Payment Funds
The Borrower has to provide the required down payment funds at closing. All monies required to build the project must be on deposit with Vectra Bank at closing.
Construction Costs Paid at Closing
The borrower may authorize some of the building cost be paid such as real estate commission and closing costs.
With the exception of flood insurance escrows (for properties in a flood zone only), required tax and insurance escrows are not collected at closing. When the loan is ready to convert to the permanent phase, the appropriate amounts for tax and insurance escrows will be collected from the Borrower. Payment of Taxes and Insurance are the responsibility of the Borrower during construction.
If you do not already own your lot, the purchase of your lot can be coordinated at closing.
An acceptable current boundary survey is required.
Work Started Prior to Closing
Please note that it is imperative to the close of your loan transaction, that no construction work or lot grading occur prior to the official loan closing of your OTC mortgage. This also means that no materials or supplies can delivered to construction site until after OTC closing.
After loan closing, you will be assigned to a representative in the Draw Team who will handle the disbursement of the construction funds.
Depending on the loan amount, the Borrower may have to deposit funds to cover the difference between the loan amount and the cost of construction. The borrower funds will be disbursed first before the loan is funded.
Process for Obtaining a Disbursement
Progress is made on the project.
Documents needed at the first draw are:
Documents needed at all draws are:
General Disbursement Guidelines
The Borrower will make monthly interest–only payments based on the outstanding loan funds
All changes in the project must be submitted to Vectra Bank in order to determine the impact the changes may have on the appraised value of the loan terms.
Progress inspections will be performed at each disbursement. The inspections are performed solely for the benefit of Vectra Bank and should not be relied upon by the Borrower or the Builder to ensure quality, craftsmanship, code compliance or adherence with the plans and specifications.
The Borrower will pay a fee at closing that is an estimate of the cost for the progress inspections and one final inspection. Borrower is responsible for inspection fees that exceed the estimated amount collected at closing.
Real Estate Taxes
The Borrower is responsible for paying all Real Estate taxes when they come due and for providing proof of payment.
Improvements Not Included in the Loan
All improvements, whether part of the loan or paid for outside the loan, must be completed prior to the maturity of the construction phase.
Modification of Loan Terms
In the event that the loan requires a modification of loan terms, the Borrower will be responsible for all modification fees, including, but not limited to, modification fee, extension fee, credit report fee, recording fee, and appraisal fee. Other costs may be incurred.
The Borrower's and Builder's Responsibility
Working together to build your dream home and to follow the lender's loan guidelines are both the Borrower's and the Builder's responsibility. We encourage both of you to:
Typically, 30 to 45 days before the scheduled conversion from the construction phase to the permanent phase, the Borrower will begin discussions with the Construction Draw Team regarding the requirements for conversion.
In order to convert the loan from the construction phase to the permanent phase, the following conditions must be met.
Permanent Phase Amortization
Our construction loans are term exclusive, which means, the construction phase is not included in the term of the loan. Therefore, the permanent phase (amortization period) is determined by the length of the original amortization of the loan.
Can I start my project before loan closing?
No, please do not start the project before loan closing. An early start may hinder our ability to obtain proper title insurance coverage and may prevent us from closing your loan.
Do I have to own my lot prior to closing?
No, you do not have to own the lot prior to loan closing. The lot may be purchased at the closing of the Construction–Perm loan.
Who are the construction funds released to?
Funds may be released directly to the Builder.
How long does it take to get a draw?
Typically, it takes 5-7 days from the receipt of the Draw Request until funds are disbursed.
Who pays for cost overruns during the construction phase?
The Borrower is responsible for paying the overages out of pocket unless the loan has a Contingency Reserve.
During the construction phase, what type of loan payment do I make?
Monthly interest–only payments unless you carry flood insurance, which requires an additional monthly payments for flood insurance premium and escrow.
How is interest calculated during the construction phase?
Interest is based on the outstanding loan funds.
What happens if my project is not completed prior to the maturity of the construction phase?
The construction phase may be extended to allow time to complete the project. The Borrower is responsible for extension fees including, but not limited to, an extension fee, and modification fee. Subject to restrictions.
Acquisition Cost – The total cost of construction including the home, land, closing costs, interest and other construction related items.
Affirmative Title Coverage – Coverage provided by the title company insuring against filed and unfiled liens. This is obtained in situations where the project has started prior to closing and recording of the security instrument.
Borrower's Deposit – The amount of the Borrower's down payment that will be deposited into the construction account to cover the cost of the project
Builder's Risk Insurance – Insurance that covers the project from theft, vandalism, weather, and defects. Usually this is provided by the Builder, but can be provided by the Borrower.
Building Contract – The written agreement between the Borrower and the Builder for the construction of the home and all improvements.
CCR's – Conditions, Covenants and Restrictions – This document is created for a specific subdivision development to ensure that each project adheres to the parameters set for by the developer.
Certificate of Occupancy – A document furnished by a local government indicating the project meets local and state building codes, ordinances, and regulations, and is ready to be occupied.
Change Order – An agreed upon written change in the project between the Borrower and Builder.
Construction Phase – The time period during which the Borrower will make monthly interest only payments based on the outstanding loan funds.
Construction Phase Interest Rate – The rate of interest charged on the outstanding loan funds during the construction contingency phase.
Conversion – The date on which the loan will convert from the construction phase to the permanent phase.
Cost Plus Contract – A building contract that has an estimated cost but allows for the actual expenses related to the completion of the project to be passed onto the homeowner.
Contingency Fund – A reserve of money set aside to cover possible unforeseen future expenses.
Disbursement – The remittance of construction funds to the designated party.
Earnest Money – The funds given to the Builder by the Borrower per the terms of the building contract.
Final Inspection – An inspection performed by the appraiser indicating the project was satisfactorily completed per the plans and specifications.
Fixed Price Contract – A contract that has a fixed price for the building of the home and which has been agreed upon by the Builder. Often times the contract includes allowances for specific items like flooring, cabinets, light fixtures, plumbing fixture and landscaping.
Foundation Endorsement – This is provided by the title company and is an endorsement to the title policy indicating the home is located within the boundaries of the mortgaged property and there are no easements or encroachments present.
Foundation Survey – Provided by a registered land surveyor indicating the location of the structure on the mortgage property.
General Liability Insurance – Insurance obtained by the Builder to protect against certain claims and lawsuits against the Builder alleging that the Builder's negligence has resulted in bodily injury or resultant property damage to a third party. Such claims/lawsuits can arise while construction is ongoing or many years after the home is sold.
Hard Costs – The part of the cost to build that includes labor and materials (i.e. bricks, sheetrock, framing, etc.).
Homebuilder's License – License that is obtained by the builder and requirements vary by state.
Inspection – A visit to the job site by the lender's representative to determine the progress.
Lien – A document filed in the county records claiming that money is owed for work or materials furnished on the property.
Lien Waiver – A document that waives the right to file a lien and is usually provided after payment is made.
Mechanic's Lien – A lien filed against the property by a person who performed labor or provided materials during a project and was not paid.
Modification – Change in loan terms, such as an extension, increase in loan amount or change of interest rate.
Modular Home – A prefabricated structure that is delivered to the job site on the back of a truck and is hoisted onto the foundation with a crane
On Frame Modular Housing – A prefabricated structure that has a steel undercarriage and is transported to the site by a truck.
Owner/Builder – An individual building their own home.
Perc Test – Percolation test. A test performed to determine if the soil conditions are acceptable for a septic tank system.
Permanent Phase – The time period following the construction phase during which the borrower makes payment according to the terms of the Note.
Pre–Sale – A project in which the homeowner has a contract with a builder to build a house.
Site Built Housing – Housing that is constructed entirely on the project site.
Soft Costs – Costs associated with the project other than labor and material costs, such as plans, fees, permits, etc.
Stick Built Housing – A home built on site using traditional wood frame construction.
Sweat Equity – The labor performed by the Borrower or the consideration of labor from the Borrower to the Builder that is used as an equity consideration.
Title Endorsement – Enhancements or updates to the title policy for items (liens, mortgages, exceptions) on the property that would prevent Vectra Bank from having priority on the title.
There are many important things to consider throughout the process, especially if you’re a first–time homebuyer. Click Here for some information that will keep you on track.
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Our friendly staff is here to help you with all your mortgage needs. We will use our expertise to find the right program for you. Please give us a call at: 800–737–6620 (Mon – Sat, 7am – 7pm MST), or complete the form below.