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Jumbo Single Close Construction Loan

Looking to construct a new home, but your price range is outside of conventional mortgage restrictions? GO Mortgage understands the frustration of searching for a mortgage that will let you construct your dream home. A Jumbo Single Close Construction Loan may be the solution to your frustrations.

Here we’ll introduce you to what exactly a Jumbo Single Close Construction Loan is, how you can qualify, the benefits, and more.

What is a Jumbo Single Close Construction Loan?

A Jumbo Single Close Construction Loan is a form of Construction to Permanent financing that goes beyond normal mortgage restrictions set by the Federal Housing Financing Agency. Conventional conforming mortgages only allow a loan of a certain amount for a household. Most counties limit a conforming loan to a maximum of $510,400 per one-unit home, although high-cost areas can expand on this limit. If a borrower wishes to go beyond this conventional loan limit, they’ll need to seek out a jumbo loan.

Jumbo loans are less common, considering they’re a larger risk for loan companies. These loans, which are also called non-conforming loans, cannot be guaranteed by Freddie Mac or Fannie Mae. Since they are riskier, they often have stricter qualifications and restrictions.

How Does a Jumbo Single Close Construction Loan Work?

Now that we’ve explained what a jumbo loan is, where does the Single Close Construction Loan come into play?

Building a new home is an expensive ordeal. Traditionally, when building a new home, a borrower will have to take out two loans - one for the construction of the new home and one for the mortgage. These two loans can be rather expensive and time-consuming for a borrower considering they will need to close twice on these loans.

A Jumbo Single Close Construction Loan is a solution that helps future homeowners purchase and construct a new home that is outside the price range of a conventional conforming loan. A Jumbo Single Close Construction Loan eliminates the need for multiple closings. Multiple closings only add to the project’s expenses.

With a Jumbo Single Close Construction Loan, the primary construction loan will convert into a permanent loan once the construction is finished. This loan is especially helpful to people seeking jumbo loans since the mortgage is already significantly larger than a traditional conforming loan.

For these types of loans, the maximum loan amount is up to $1,350,000 and $1,500,000 for high-cost areas, respectively maximum loan amount is subject to LTV and FICO score restrictions.

What Are the Loan Qualifications for a Jumbo Single Close Construction Loan?

As stated previously, restrictions are stringent for a Jumbo Single Close Construction Loan. Banks must be able to guarantee a borrower will pay. Here are some general qualifications for a Jumbo Single Close Construction Loan:

  • FICO credit score above 700, in some cases 720
  • Low Debt to Income (DTI) ratio - cap of 45%
  • Cash reserves to cover one year of mortgage payments
  • Extensive documentation including tax returns, W-2s, 1099s, and bank and investment account information
  • Possible second appraisal of home
  • Down payments are generally 10-20% of the property purchase price

What Are the Benefits of a Jumbo Single Close Construction Loan?

There are many benefits to a Jumbo Single Close Construction Loan. When you choose a Jumbo Single Close Construction Loan, you’ll benefit from:

  • One single close
  • No re-qualifying process after the construction process is completed
  • Ability to finance more than the conventional loan limits allow
  • Fixed, competitive interest rates
  • Reliable team of GO Mortgage professional to assist you throughout the entire process

Alternatives to Jumbo Single Close Construction Loan

There are, what seems like, endless options for mortgages, so if you’re worried that a jumbo loan is not in your price range, no need to worry. Here are a few alternatives to Jumbo Single Close Construction Loans:

  • High-Balance Conforming Loans - This loan lands somewhere between conforming and jumbo loans. It allows you to exceed set limits but offers lower rates.
  • Fannie Mae Single Close Construction Loan - Gives buyer the opportunity to combine construction and permanent loans within FHFA limits
  • Veterans Administration One-Time Close - Available for veterans or active duty military persons that are building a new home

If none of these alternatives are suited for your needs, don’t stress. GO Mortgage can help you find the perfect mortgage solution for you!

Applying for a Jumbo Single Close Construction Loan

Jumbo Single Close Construction Loans vary from bank to bank, but below are some general guidelines for the application process:

  • Contact a lender to get pre-approved for the loan
  • A credit and full financial review will be conducted to determine your ability to repay the loan. Remember, this will include credit scores, banks/investment statements, DTI ratio, and more.
  • Make sure to check for any inaccuracies on the credit and financial report. Rectify these inaccuracies before the credit review process takes place
  • Be prepared to demonstrate proof that you either currently own or will be purchasing a lot on which your property is going to be built
  • You will most likely need to have a contract with a lender-approved builder
  • A financial review will also be conducted to ensure you can meet the minimum down payment required by the lender

Jumbo Single Close Construction Loan with GO Mortgage

GO Mortgage is a leading source of Jumbo Single Close Construction Loans to homeowners everywhere. When you partner with GO Mortgage, you get a partner to guide you through the entire, complex process. For information on qualifying and more reach out to us today!