Construction to Perm Loans
Building a new home is a big commitment requiring time and money. At TEG FCU, we can make things easier for you with our construction-to-permanent financing.
What is a Construction-to-Permanent (CTP) Loan?
A Construction-to-Permanent loan allows you to borrow money to build a home. Our CTP loan provides options for:
- Financing the construction of a new home on your lot
- Financing the purchase of a lot as well as the home construction
- Site-built, Modular Kits, and Log homes are eligible
Our CTP features a single close, with interest only during construction, that automatically converts to a permanent mortgage upon completion.
Our TEG Construction-to-Permanent Loan Packet will provide an overview of the following steps:
- Meet with your loan officer
- Select your home design and contractor
- Submit your application
- Obtain TEG credit and project approval
- Close your loan
- Build your home
- Convert to a permanent mortgage
The TEG CTP loan product is limited to Dutchess, Orange, Ulster, Putnam, Rockland, Sullivan, and Westchester Counties. Exceptions outside of these counties, while still in New York State, will be considered on a case-by-case basis.
Frequently Asked Questions
What types of properties can I finance with construction and permanent home financing?
Single-family homes. This includes stick-built, modular, and timber frame or log kits.
How are construction loan proceeds disbursed?
Construction proceeds are disbursed per your approved construction draw schedule. Your mortgage loan officer or processor will provide a draw schedule template. An initial advance to your builder up to 80% of your land value may be itemized on the draw schedule to be disbursed by Mortgage Servicing after the loan has closed.
Subsequent draws will be for completed work and require a draw request with inspection. Advances for special order items, such as custom cabinets or windows, that are itemized separately from labor on the draw schedule may be requested, with payment to be issued directly to the vendor.
Final payment for modular or kit home delivery can be requested without an inspection.
Can I finance an investment property?
No. The Construction to Perm Loan may only be used with the property that is intended as an owner-occupied primary residence or second home. Our Business Lending department can assist with construction to perm financing for investment properties and builder construction only.
Can a subcontractor or materials supplier file a construction lien against my home?
Yes. Even though you might pay your builder, if your builder does not pay the subcontractors or material suppliers, they can file a mechanics lien against your property.
Can I act as my own general contractor?
No. A qualified general contractor or builder is required to oversee the project.
Who pays for cost overruns during the construction phase?
The Borrower is responsible for paying the overages out of pocket. The borrower may include a contingency reserve in their construction draw schedule to buffer any change orders or cost overruns if requested.
Can I start my project before loan closing?
No, you may 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.
How is interest calculated during the construction phase?
Interest is based on the funds advanced calculated at the note rate for the loan.
Do I have to own my lot prior to closing?
No, you do not. The lot may be purchased simultaneously with the closing of the Construction to Perm loan.
How much will my property taxes be on my completed home?
TEG will use the appraiser’s estimate as to what your taxes will be at completion. Your local tax assessor may be able to answer any further questions.
I paid cash for my lot. Can I get cash back at closing?
No. We consider this equity into the project and credit towards your down payment. Cash back to the borrower is not allowed. You may use the equity in your land for an initial disbursement to your builder to get the project started.
What happens if my project is not completed prior to the maturity of the construction phase?
You may request an extension for your project to allow time to complete construction. If granted, conversion to the permanent phase will still occur at the end of your scheduled construction term, and you will begin making principal and interest payments on your loan amount. An interest-bearing escrow holdback account will be established to fund the remainder of your project.