What payments will I need to make during the construction phase? Will the lender advance construction funds prior to the work being completed?

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2 Q&A What is a cnstructin lan? A cnstructin lan prvides the financing fr the cnstructin f yur new hme. Cnstructin lans may be structured as a single r tw-settlement transactin. Cnstructin lans culd include the rehabilitatin r rehab f an existing hme. What types f cnstructin will the lender finance? Cnstructin financing is available fr primary residence, secnd hmes and speculative r spec hmes. The fllwing types f cnstructin are financed: New cnstructin n yur lt r urs Remdel f Existing Hmes Tear Dwn and Rebuild What payments will I need t make during the cnstructin phase? Yu will receive a mnthly bill fr the interest due n the funds disbursed. This is based n the interest rate f the cnstructin lan. Yu will als be respnsible fr any taxes and insurance. Yur lan may be set with an interest reserve accunt. This is an escrw accunt established t make the lan payments during cnstructin. What kind f permanent financing is available? Yu can select frm a wide range f fixed and adjustable-rate prducts, as well as VA Financing. Based n yur needs, ur preferred lenders will help yu determine the prduct best suited fr yu. Will the lender advance cnstructin funds prir t the wrk being cmpleted? N, funds will nly be released frm the cnstructin escrw accunt as the cnstructin prgresses and nly fr cmpleted wrk. N funds will be released t pay fr supplies, unless apprved in writing by all parties. Will the lender release funds accrding t my cntract with my builder? Generally s, but accrding t yur schedule f advances agreed upn with the lender and builder, yur lan schedule may nt be changed after clsing. Yur draw schedule is develped in cnsideratin with yur builder cntract. The schedule includes a checklist f items, which are assigned a percentage f the ttal cnstructin csts. Funds are released accrding t the verall percentage cmplete.

3 Can I make changes t the plans and specificatin during the cnstructin perid? Yes, the change rder prcess dcuments changes yu may want t make and the csts, if any, assciated with the change. Will the lender pay the interim tax bills frm the established escrw accunt? N, the escrw accunt is established t pay future annual tax bills as they cme due. The interim tax bill is a bill charged by the tax assessment ffice t pay the taxes due fr the prtin f the year frm when the new huse was built in the current perid. Remember, the taxes paid n new cnstructin are based n the assessed value f the lt nly. The assessment ffice will reassess the prperty after the huse is cmpleted. Hw can I estimate the amunt I ll need t fund my escrw accunt? There s n easy answer t this questin. Yur tax rate is a factr f the assessed value f yur hme and the millage rate. The amunt yu ll need t depsit will be further affected by the mnth yur lan cnverts in relatin t the mnth the tax is due. Yur lcal tax cllectr s ffice may be able t ffer specific numbers fr yur situatin. Tell me mre abut a hw a tear dwn and rebuild wrks? Q&A Land is at a premium and many clients lve their lcatin. Tearing dwn an ld huse and building new generally makes mre sense than renvating an ld ne. This wrks just like a typical cnstructin lan, hwever, we need t make certain we have enugh land value t pay ff yur existing mrtgage with the first draw f yur lan. Why use yur preferred lenders fr my cnstructin financing? Isn t this just anther lan? Cnstructin and Cnstructin-t-Permenant lending is a speciality that many lenders d nt ffer r are nt experienced with. Calvert Luxury Hmes will suggest several experienced lenders wh we wrk with regularly, but it is yur chice wh yu want t wrk with.

4 Terms Dwn Payment Yur minimum dwn payment ptin may nt be determined until the appraisal has been cmpleted and reviewed by underwriting. Depsits with the builder and fees paid t thers fr the purpse f the cnstructin f yur hme, may be credited as funds tward yur dwn payment. Mechanic s Lien Cverage Mechanic s lien cverage will be required fr yur cnstructin permanent lan. In cnjunctin with each draw funded t the builder, an interim title search may be cnducted t determine that n mechanic s lien has been filed against yur prperty. A lien may be filed by a sub-cntractr, supplier, and any persn cntracted t prvide prducts r services fr yur hme. Shuld a mechanic s lien be placed, this cverage is yur insurance plicy t prtect yu and assure yur clear title. Stipulatin Against Liens Yur builder and any ther cntractrs wh prvide estimates fr part f the cnstructin f yur hme are required t sign a stipulatin against liens (a waiver f mechanics liens), which will prevent them frm placing a lien against yur prperty, which wuld supersede the first mrtgage lien. This waiver must be signed at r befre clsing. Requirements may vary frm state t state. Cnstructin Escrw Cnstructin mney is held in escrw by the lender. Funds are disbursed in pre cntracted draws, based n percentage f wrk cmpleted as wrk prgresses. The builder will require financial draws against yur lan t pay sub cntractrs, suppliers, and ther expenses assciated with the cnstructin f yur hme. Cnversin t Permanent Mrtgage If yur lan is a single settlement cnstructin-permanent mrtgage, yu will be ntified the mnth prir t yur cnversin date. At that time, interest due will be established, (pending weather related escrws), alng with escrws fr taxes and insurances. If yur lan is a tw settlement cnstructin-permanent mrtgage, apprximately 60 days prir t cmpletin f yur hme, yur lan fficer will prvide yur permanent mrtgage ptins. If an escrw accunt is required fr taxes and insurances, the escrw accunt will be set up at this time. Yu will be required t depsit sufficient funds in the escrw accunt t cver the taxes and insurances, as they are due. Withut any penalty, yu may pay ff yur cnstructin lan and seek permanent financing with anther lender.

5 Inspectin and Cnstructin Draws Yu will receive a dcument at settlement detailing the percentage f cnstructin t be cmpleted and the prcedure invlved t disburse funds set up as draws. The bank assigns an inspectr t visit yur site t verify cmpletin f wrk prir t release f funds. A final inspectin will be cnducted upn cmpletin f all wrk cntracted. Single Settlement vs. Tw Settlement Our preferred lenders ffer bth Single and Tw Settlement cnstructin lans. A lender wuld nt serve yu well t recmmend either type f transactin withut knwing all f the facts abut yur lan. That is yet anther reasn yu shuld cnsult with yur prfessinal lender t explre the best pssible cnstructin lan fr yu. Cst Overruns During cnstructin f yur hme, yu may experience unexpected csts r changes. Yu may als incur change rders due t mdificatins yu make t yur hme. Yu are respnsible fr any csts verruns and any additinal csts incurred. The lender must make certain all mney is accunted fr and available t cmplete the cnstructin f yur hme. Once cnstructin has begun, please cnsult yur lan fficer with any change rder questins. Lt-Cnstructin Packages Financing packages may be btained which include the purchase f a lt plus cnstructin csts. These packages require nly ne clsing. The seller will be paid at clsing and the cnstructin mney will be held in escrw and paid in draws as the cnstructin prgresses. Because ur preferred lenders require plans and specificatins with the lan applicatin, yu shuld finalize yur plans with the builder prir t signing an agreement f sale n the land and chsing this financial package. If suitable land is fund, but it is nt practical t finalize cnstructin details within a time-frame suitable t the seller, yu may chse t use a lt financing prgram and rll it ver int a cnstructin lan when yu are ready t build. Draws Terms A draw is a partial disbursement f the cnstructin lan based n the schedule f payments in the lan agreement. Disbursed funds are based n wrk cmpleted per the draw schedule.

6 Terms Survey Befre the release f the first prgress draw, there may be a wall check upn cmpletin f the fundatin n yur prperty. This certifies the exact lcatin f the fundatin n the prperty. Once the hme and all exterir imprvements are in place, such as sidewalk, driveways, decks, etc., a final survey is required upn mdificatin r secnd clsing. Building permits Any required building permits must be submitted t the lender n later than the first disbursement f the cnstructin lan. EQUITY Lt Equity If yu wn yur lt and have an utstanding mrtgage balance, in mst cases, the lender will satisfy that lien with the cnstructin lan. At clsing, the lender will fund the land advance. The value f the prperty, less the land advance, equals the Lt Equity. In many cases yu may brrw against this equity t help cver yur csts. Crss Cllateral Equity Many brrwers have equity tied up in their existing hme r sme ther prperty. Our lenders may reduce r even eliminate yur ut f pcket cash requirement by using yur equity as cllateral. They will cnduct an appraisal n cllateral prperty t assess the equity available. Once the cllateral and its equity have been determined, a simple lien will be placed n the prperty.

7 INSURANCE Title Insurance Title insurance is required by the lender. If title insurance is currently held n yur prperty, frward a cpy f yur plicy t the title cmpany clsing yur lan. The plicy, if accepted, may reduce yur title insurance fee. Hazard Insurance Hazard insurance, which must prvide cverage fr at least the value f the dwelling in the event f a fire r strm, is required at clsing. Mst brrwers will btain a hmewner s plicy, which insures the cntents f the hmes and prvides liability prtectin alng with fire and strm cverage. A Builder s Risk plicy is required with all Cnstructin-Permanent Lans. Builder s Risk Insurance Calvert Luxury Hmes will have all the apprpriate insurance cverage s t prperly build yur hme with the necessary prtectin, yu will need an additinal plicy t prtect yur hme during cnstructin. This plicy is a rider n yur hmewner s plicy called Builder s Risk Rider. Since yu wn the prperty, there have been circumstances where the Builder s standard cverage des nt cver certain lsses shuld they ccur. Again, please cnsult yur Insurance Agent and ask abut the Builder s Risk Plicy when building a new hme n yur lt. Fld Insurance If any f the prperty lies within an area designated as a special fld hazard area, fld insurance will be required. Fld insurance must als be purchased t prvide cverage during the cnstructin perid. Mrtgage Insurance Terms Mrtgage insurance(m.i) is usually required n lans with less than 20% dwn payment. The premiums fr this insurance may be required during yur cnstructin lan, n a case by case basis. On yur permanent lan, yu may be eligible fr ne f ur NO MI prgrams, regardless f yur dwn payment.

8 Applicatin The fllwing check list items are standard fr applicatins f Cnstructin- Permanent Financing 30 days mst recent paystubs 60 days mst recent bank statements Last tw years W2 s, (Tax Returns if self-emplyed r cmmissin sales) Cnstructin agreement signed by yu and the builder. If yu are still negtiating r mdifying yur plans, cntact yur lan fficer. Detailed specificatins f cnstructin plans. A cpy f cntract t purchase land, r deed if yu already wn the prperty. (HUD-1 r settlement sheet may be necessary) Estimates fr wrk that will be dne by thers, utside f builder cntract. If yu have just started the prcess f searching fr the perfect hme, yu may want t cnsider pre-qualifying fr a mrtgage. Such preparatin may make yur search much mre efficient, saving yu what can ften turn int weeks f walkthrughs and negtiatins. Yu invest a lt f time in chsing the right hme. Make sure yu chse the right mrtgage. Let ur preferred lenders shw yu hw.

9 Luxury Hmes & Remdeling Fr ver 40 years, Calvert Luxury Hmes has designed and built hundreds f hmes thrughut Nrthern Virginia. We build hmes f high quality with yur needs in mind. We design and build t suit yur family s lifestyle. Meet Bb Wilcx, Master Builder, fr a free design cnsultatin. Let us craft yur dream hme nw! Calvert Hmes, Inc A Lake Ridge Drive Lake Ridge, VA Bb Wilcx, Master Builder [email protected] calvertluxuryhmes.cm r calvertdesign-build.cm