Items to supply your loan officer
In addition to the normal credit items, individuals considering a home construction loan must provide:
- Detailed and accurate building plans
- Specification list
- Builder cost breakdown
- Copy of deed (if titled to the borrower)
- Copy of purchase agreement (if lot is being purchased at closing)
- Site survey (if the borrower does not have a site survey, the title agent can coordinate providing a mortgage location survey prior to the loan closing)
What to expect from our home construction loan process and procedures:
12-month construction period, one-time close
Our residential construction loans are made as one-time close “construction-to-permanent” loans. The rate and term are set at the time of application and carry through to the completion of the dwelling and then on to the permanent, amortizing loan. During the construction period, the borrower can draw down funds to cover building expenses. They only make interest payments based on the total outstanding balance of the principal during the billing period. They will also need to pay escrow for real estate related taxes, homeowner’s insurance, flood insurance (if applicable) and private mortgage insurance (if applicable).
You select your general contractor
The general contractor manages all of the sub-contractors on the project. As the homeowner, you have the freedom to select your preferred general contractor, but they must provide proof of applicable state licensing, liability insurance and worker’s compensation insurance.
The borrower must own—and possess the title to—the building lot
The lot can be purchased at closing as part of the construction-to-permanent financing. WesBanco must be the first lien on the property. If the borrower owns the lot prior to applying for the loan, the equity in the lot may be considered in determining the loan-to-value ratio. If you’re not ready to build yet, but found the perfect spot, WesBanco also offers land purchase loans.
The appraiser determines the value of the property
This is based on the plans, specifications and contract to build the house. The appraiser then conducts all future progress inspections based on this information. WesBanco requires evidence of homeowner’s insurance and builder’s risk prior to the loan closing.
What happens in the loan documentation & closing process
Once the loan documentation for your construction mortgage is executed, all documents which must be filed with the county recorder are filed by the closing title agent or attorney. They work directly with our closing department in the transferring of title, filing of mortgages and disbursing funds for payment of title charges, lot purchase and other closing related items. No construction work of any nature should begin prior to the loan closing.
Once the loan closes, your file is transferred to the Residential Construction Loan Department where it will remain until the completion of the house. You will receive an introduction package from the Residential Construction Loan Department which includes instructions for the draw process and the related forms depending on the location of your property along with contact information for the department.
A foundation survey is required
Prior to the disbursement of the foundation draw, the foundation must be installed, and a foundation survey must be completed. The purpose of this survey is to make sure the placement of foundation complies with all applicable building and lot line requirements.
The builder or the borrower must submit the required documentation to the Residential Construction Loan Department for each draw. A progress inspection is ordered. This inspection is conducted by the independent licensed appraiser who conducted the original determination of value. Alternatively, an independent inspection service chosen by WesBanco may be used if the original licensed appraiser is not available, or we deem it necessary to utilize another inspection service to complete the review.
Prior to the release of each draw, the Residential Construction Loan Department reviews all related documentation and the progress inspection to confirm the amount of the draw release. Draws are released jointly to the borrower and their general contractor unless other arrangements are made to allow release directly to the general contractor.
Interest-only payments during construction
During the construction period, interest on the mortgage is billed monthly based on the funds disbursed from the loan. Borrower-contributed funds are generally used first and no interest is owed on these funds. In addition to the interest due, any items paid through escrow are also due. All payments are due on or before the 1st day of the following month.
Convert to permanent financing
If construction is complete and the 12-month construction period has expired, the loan will automatically convert to repayment of principal, interest and escrow. If the 12-month construction period has not expired and the borrowers wish to convert to repayment, a modification agreement must be executed by the borrowers and the bank.