1. Construction-to-Perm Financing
FHA One-Time Close
Construction-to-Perm Financing
for Today’s Market

2. Agenda
Overview
Construction-Perm (4155 Guidelines)
Eligibility
Requirements
Documentation Requirements (Closing and Endorsement)
Process
Builder Approval
Structuring the Deal
Draw Process
Value Proposition for All Parties

3. Overview: Features of the FHA One-Time Close
Combines the Following Features:
A construction loan, which is a short-term interim loan for financing the cost of construction, and
The traditional long-term permanent mortgage
Involves only one closing
Is considered a purchase transaction, for mortgage insurance and LTV purposes, and
Is made directly to the borrower
New Construction, Build on Your Lot Financing for Today’s Market
Standard FHA guidelines apply
3.5% down payment or Land in Lieu of down payment
6% seller concessions
No interest payments due during construction by either the builder or the buyer
Works for lot purchase or existing land
No additional appraisal after closing
No additional credit pull/qualifying after closing
Borrowers can build anywhere

4. FHA Construction-Perm Mortgage Program
Contract with the Builder: The borrower has contracted with a builder to construct the improvements. Note: Borrowers are not allowed to act as his/her own general contractor.
Lot Ownership: The borrower must own or be purchasing the lot at the closing of the CP loan. Note: If the builder / builder owns the lot, the lot must be included in the total contract price.
Lot Acquisition: If the borrower purchased the lot within the past six months, he/she must provide a copy of the HUD-1 Settlement statement, or other settlement statement showing the acquisition cost. If the borrower owns the lot free-and-clear, the lender must document the date of ownership and omission or any liens from title work and settlement statements.
Verification of Loan Balance/Escrow Account :The balance on the CP loan, when it is fully drawn, must be verified. The construction escrow account, if established, must be fully extinguished.
Sales Agreement: The borrower must provide a copy of the fully executed contract agreement, which includes the builder’s price to build.

5. FHA Construction-Perm Mortgage Program
Land Equity: Equity in the land may be used for the borrower’s down payment. Land-in-Lieu. Note: If the value of the land is lower than the acquisition cost, the value must be used in calculating the maximum mortgage amount. If the builder is also the seller of the land, the total acquisition cost for the maximum mortgage purposes is the borrower’s purchase price. Note: If the land has been owned more than six months, or was received as an acceptable gift, the value of the land may be used instead of its cost.
Permanent Loan Interest Rate: The permanent mortgage loan interest rate is locked at the time of closing.
Amortization: Amortization must begin no later than the first of the month within 60 days from the date of 1) final inspection or 2) issuance of certificate of occupancy, whichever is later.
Eligibility for Insurance: The lender must provide a disclosure to the borrower explaining 1) that the loan is not eligible for FHA mortgage insurance until after A) final inspection or B) issuance of a certificate of occupancy, whichever is later and 2) that FHA has no obligation until the mortgage is endorsed for insurance.

6. FHA Construction-Perm Mortgage Program
Cash Back to Borrower: Borrowers are not permitted to receive cash back.
Maximum Mortgage Amount: The maximum mortgage amount is determined by applying the LTV limits to
the lesser of the appraised value or the acquisition cost. The acquisition cost includes
builder’s price to build
borrower-paid extras over and above the contract specification and/or out-of-pocket expenses over and above the interim loan
cost of the land, and
closing costs
Construction Period Fees: The following costs are paid by the builder during construction:
construction loan interest
commitment fees
inspection fees
title update charges
real estate taxes
hazard insurance
other financing charges incurred during the construction period
Note: Interim construction fees are not due during the construction period. If the interest reserve is not sufficient to cover the actual costs, the additional costs will be deducted from the builders final draw.

7. FHA Construction-Perm Mortgage Program
Disbursing Funds: Written approval from the borrower must be obtained before each draw payment is provided to the builder.
Closing Documents: Standard FHA documents are used when closing a construction-permanent mortgage loan, with the addition of
Construction Rider or Allonge to the Note, and
Construction Loan Agreement
Lenders must also provide an executed Loan Modification Agreement to confirm the existence of a permanent loan and that corresponding amortizing interest on the mortgage loan shall commence or commenced with 60 days of the property being 100% complete.
Documentation Required for Endorsement: Prior to endorsement the lender must obtain
A certification, signed by the borrower after conversion to the permanent loan, that the mortgaged property is free and clear of all liens other than the mortgage
Verification that the construction loan has been fully drawn down
All property related requirements for new construction.

8. Builder Approval Completed Builder Approval Package
Signed General Authorization Letter (included with Builder Profile and Registration packet)
Acceptance letter from HUD acceptable 10-Year Warranty company
Copy of State Builder License or Registration (if applicable);
Copy of Occupational or Business License;
Copy of Declarations Page: Worker’s Compensation Insurance & General Liability Insurance;
Documentation on any ‘affiliated” business arrangements/ownership/affiliations;
Copy of Principal(s) Resume;
Copy of Articles of Incorporation; and
Copy of 2009 business tax returns (for business) or personal tax return (for sole proprietor).
Copy of 2010 business tax returns (for business) or personal tax return (for sole proprietor). If extension was filed, need 2010 financials.
2011 YTD Financials

9. BUILDER
Application
Completion and acceptance of the Builder Approval Package
Must have an acceptable track record with trade references listed
Page 5 signed and notarized
Signed General Authorization Letter (credit is pulled on all builders)
Copy of builder’s commercial insurance policy or policies indicating an acceptable level of general liability coverage.
Copy of any/all licenses required by the state in which business is conducted.

10. P&L and Balance Sheet
Year-to-Date P&L and Balance Sheet

11. BUILDER APPROVAL PROCESS
Builder Completed Approval Package
Builder Submits Approval Package to Correspondent Lender
Correspondent Submits Completed Package to WMC
WMC Reviews Builder Packet including reference checks, insurance verification, etc.
WMC Notifies Correspondent of Builder Approval/Denial

12. LOAN FLOW Loan Modification Retainage Release *31 Days
Originator to Complete Loan Calculator Worksheet
Borrower Approval
Underwriting
Doc Prep (completed by MRG)
WMC Purchases Loan
Disbursement: Land Payoff at Closing
Funding
Closing
Draw 1: 10% Soft cost immediately after closing, Borrower Signature Required
Draw 2: Inspection Required, Buyer Sign Required
Draw 3: Inspection Required, Buyer Sign Required
Draw 4: Inspection Required, Buyer Sign Required
Draw 5: Inspection Required, Buyer Sign Required
Loan Modification
Retainage Release
*31 Days
*Number of days for retainage can vary by state

13. Draw Requests The following are required for the final draw:
Signed by Inspector verifying completion of all work items from bid
Builder signature
Borrower Signature

14. CONSTRUCTION-TO-PERM LOAN CALCULATOR WORKSHEET
STRUCTUING THE LOAN
USING THE
CONSTRUCTION-TO-PERM
LOAN CALCULATOR WORKSHEET

15. Interim Financing with Weststar Mortgage

16. Stage 1 *Weststar will disburse 10% of available construction funds immediately after closing
Excavation/Plans/Permits/Site Prep/Other miscellaneous costs
Stage 4 *Weststar will disburse 48% of available construction funds at completion of the following:
a) Insulation
b) Sheetrock/Plaster
c) Interior Trim and Doors
d) Interior Plumbing
e) Cabinets/Tile/Paint
Stage 2 *Weststar will disburse 15% of available construction funds at completion of the following:
a) Primary Plumbing Rough In
b) Footings, Foundation & Slab
Stage 5 *Weststar will disburse remainder of available construction funds at completion of the following:
a) Furnace/AC or Evap. Cooler
b) Stucco, Veneer, Siding
c) Exterior Painting
d) Exterior Concrete
e) Resilient Flooring
f) Carpeting
g) Plumbing Fixtures
h) Final Electrical Fixtures
i) Appliances
j) Finish Grade & Cleanup
k) Certificate of Occupancy
Stage 3 *Weststar will disburse 33% of available construction funds at completion of the following:
a) Framing & Sheathing
b) Exterior Doors
c) Windows Set
d) Wiring Rough In
e) Secondary Plumbing Rough In
f) Primary Heating Rough In
g) Secondary Heating Rough In
h) Fireplaces
i) Roofing
j) Approved Frame Inspection
*An inspection must be completed by either a home inspector, original appraiser or an engineer. They will need to certify that each item has been satisfactorily completed according to the funding stage requirements. A signed inspection form by the borrower, builder and inspector, accompanied by digital pictures are necessary to show confirmation of completion.

17. Draws & Disbursements
Weststar purchases the loan after closing and administers the draws
Program designed to reimburse builders after various stages of completion. Work is done, then costs are reimbursed.
Borrower must sign off on all draws. No exceptions.
Inspections to be done at each draw phase.
Builder must submit Draw Request Form (Weststar will provide this form to the builder after the loan has closed)
Draws are typically disbursed within 48 hours of receiving all required documentation.
Disbursements can be made either wire transfer or a check via USPS.

18. Value Proposition Originators Buyer
Grow and strengthen your builder and realtor partnerships
Qualify more borrowers for new construction, build on your lot, financing
Help your realtor partners move those land listings
Give peace of mind to your builders by offering a ‘No Buyer Fallout During Construction” Guarantee
Stand out from the crowd by offering a specialty product that’s sure to get you noticed
Buyer
Low Down Payment Requirements - Typically, the buyer can get a loan with as little as 3.5% down payment. In some cases, if the buyer already owns the land, they get a loan with no money out-of-pocket by using the land as equity.
Reduces Costs and Frustrations - Saves on closing costs and hassles by combining the lot loan, interim construction financing, and permanent mortgage loan into one convenient, cost saving package.
Deferred Payment - Unlike a two-time close, no payments will be made during the construction process. Payment begins after completion when the buyer is already enjoying their new home.
Rate Protection with rate locked for 150 days.

19. Value Proposition Builder Realtor
Expand their potential and free up credit lines for other projects - Loans are made directly to the homebuyer offering builders the flexibility and the capital to start new projects.
Qualify, Close then Complete - As lending guidelines continue to tighten, the risk of losing would-be buyers represents tremendous risks for builders today. With the FHA One-Time Close, homebuyers are qualified, closed, and then construction begins.
Buyer fallout becomes ancient history - That's right, just like Eight Tracks, Atari and Record Albums, worry over buyer fallout will become a thing of the past! The homebuyer owns the loan from the time they close - before construction begins. Once construction is complete, the loan will then roll into permanent financing.
Simplified Draw Process – Quick turnaround on draws means a faster, smoother process, and happy builders.
Realtor
Move land listings with financing designed with buyers and land listings in mind.
Commission paid at closing.
Assures Realtors have a qualified buyer.
96.5% financing expands the potential pool of buyers.

20. Construction-to-Perm Financing for Today’s Market
FHA One-Time Close
Construction-to-Perm Financing for Today’s Market