Mortgage Glossary

Down Payment

Your minimum down payment option may not be determined until the appraisal has been completed and reviewed by underwriting. Deposits with the builder and fees paid to others for the purpose of the construction of your home, may be credited as funds toward your down payment.

Lot Equity

If you own your lot and have an outstanding balance, in most cases, we will satisfy that lien with our construction loan. This is done by incorporating the balance of your lot loan into the construction loan. At closing, we will fund the "land advance." The value of the property, less the land advance, equals the Lot Equity. In many cases you may borrow against this equity to help cover your costs.

Sweat Equity

Work completed or managed by you, outside of the builder contract, may qualify as sweat equity. We will establish additional draws to pay for additional items contracted by you. Funds may be released to you or the contractor upon completion of work contracted. If you think you are eligible for sweat equity, please consult your loan officer for details.

Cross Collateral Equity

Many of our customers have equity tied up in their existing home or some other property. We may reduce or even eliminate your out of pocket cash requirement by using your equity as collateral. We will conduct an appraisal on collateral property to assess the equity available.

Mechanic's Lien Coverage

Mechanic's lien coverage may be required on your construction permanent loan. In conjunction with each draw funded to the builder, an interim title search will be conducted to determine that no mechanic's lien has been filed against your property. A lien may be filed by a sub-contractor, supplier, and any person contracted to provide products or services for your home. Should a mechanic's lien be placed, this coverage is your "insurance policy" to protect you and assure you clear title.

Survey

Before the release of the first progress draw, we will require a wall check upon completion of the foundation on your property. This certifies the location of the foundation of the property. Once the home and all exterior improvements are in place, such as sidewalks, driveways, decks, etc., a final survey is required upon modification or second closing.

Stipulation Against Liens

Your builder and any other contractors who provide estimates for part of the construction of your home are required to sign a stipulation against liens (a waiver of mechanics liens) which will prevent them from placing a lien against your property which would supersede 1st Mariners Mortgage's first mortgage lien. This waiver must be signed at or before closing. Requirements may vary from state to state.

Building Permits

Any required building permits must be submitted to 1st Mariner Mortgage no later than the first payout on the construction loan.

Title Insurance

Title insurance is required. If title insurance is currently held on the your property, forward a copy of your policy to the title company closing your loan. The policy if accepted, may reduce your title insurance fee.

Hazard Insurance

Hazard insurance which provides coverage for at least the value of the home in the event of a fire or storm, is required at closing. Most borrowers will obtain a home-owner's policy which insures the contents of the home and provides liability protection along with fire and storm coverage. Builder's Rick Rider policy is required with all Construction Permanent Loans.

Flood Insurance

If the property lies within the area designated to be a flood hazard zone, flood insurance will be required. Insurance coverage is required upon the completion of the foundation of the house.

Construction Escrow

Construction money is held in escrow by the bank, assigned by 1st Mariner Mortgage, serving the loan. Funds are disbursed in pre contracted "draws", based on percentage of work completed as work progresses. The builder will require financial draws against your loan to pay sub contractors, suppliers, and other expenses associated with the construction of your home.

Inspection and Construction Draws

You will receive a document at settlement detailing the percentage of construction to be completed and the procedure involved to disburse funds set up as "draws." The bank assigns an inspector to visit your site to verify completion of work, prior to release of funds. A "final" inspection will be conducted upon completion of all work contracted.

Conversion to Permanent Mortgage

If your loan is a single settlement construction permanent mortgage, you will be notified the month prior to your conversion date. At that time, we will establish interest due, (pending weather related escrows), along with escrows for taxes and insurance. If your loan is a two settlement construction permanent mortgage, approximately 60 days prior to completion of your home, your loan officer will provide your permanent mortgage options. If escrow is required for taxes and insurances, the escrow account will be setup up at this time. You will be required to deposit sufficient funds in the escrow account to cover the taxes and insurances as they are due.

Single Settlement vs. Two Settlement Contruction Loans

At 1st Mariner Mortgage, we offer both Single and Two Settlement construction loans. A lender would not serve you well to recommend either type of transaction with out knowing all of the facts about your loan. That is yet another reason you should consult with your 1st Mariner Mortgage professional to explore the best possible construction permanent loan for you.

Builders

Should you consider construction-permanent financing on your next project? Contact us and we'll present all the options you need to consider before making your decision.

Cost Overruns

During construction of your home, you may experience unexpected cost or charges. You may also incur change orders due to modifications you make to your home. You are responsible for any cost overruns and any additional costs incurred. As the lender, we must make certain all money is accounted for and available to complete the construction of your home. Once construction has begun, please consult your loan officer with any change order questions.

Mortgage Insurance

Mortgage insurance is usually required on liens with less than 20% down payment. The premiums for this insurance "may" be required during your construction loan, on a "case by case" basis. On your permanent loan, you may be eligible for one of our NO MI programs, regardless of your down payment.

Lot-Construction Packages

Financing packages may be obtained which include the purchase of a lot plus construction cost. These packages require only one closing. The seller will be paid at closing and the construction money will be held in escrow and paid in draws as the construction progresses. Because 1st Mariner Mortgage requires plans and specifications with the loan application, you should finalize your plans with your builder prior to signing an agreement of sale on the land and choosing this financial package. If suitable land is found, but it is not practical to finalize construction details within a time-frame suitable to the seller, you may choose to use out lot financing program and roll it over into a construction loan when you are ready to build.

Sub-Divisions

You’ve done your homework and ultimately decided to buy a home in a builder's subdivision. Your financing needs still require the same type of expertise as construction permanent financing. Let Us help. Builders and consumers alike benefit from our vast experience and knowledge of HUD and FNMA project approvals, master appraisals, extended lock programs & flexible procedures for escrow items and final inspections. Our track record of coordinating a seamless and timely process assures you of a pleasant and rewarding home buying experience. After all the anticipation involved in making you new home a reality, you deserve a lender with the credentials and experience to finalize your transaction with minimal additional stress.