Peter Cook Mortgage

Loan Product Description

Construction Lending Conventional

OTC Lot Loan

Purchase Transaction-SFR 1 Unit Only


General Description
  • Short term interest only lot loans to individuals only to facilitate the purchase of land  for the near term building of a custom home through PCM's OTC program.
  • These loans will enable originators to work with builders, realtors, developers, and clients in the process of acquiring land and originating FHHLC OTC loans.
  • Interest collected is simple interest; this is NOT an amortizing loan.  Refer to example of How to Figure Individual Lot Loan Simple Interest on how to figure simple interest.


Origination / Processing / Underwriting

Acreage Maximum lot size 2  Acres
Appraisal
  • The most appropriate and current lot loan appraisal form must be used.
  •  Appraisal must address the following
    • Subdivision lots with Lot and Block descriptions that must be zoned residential and conform in size to the general area.
    • Appraisal confirms market value and acceptable marketability of the property.
    • Maximum marketing time to be nine months per appraisal.
    • Utilities-public water,sewer, electricity-must be currently available to site.
    • Well and septic acceptable with required inspections and permits or proof of acceptability from local authority governing issuance of permits.
    • Rural lots as indicated on appraisal report are ineligible.
  • Full URAR or 2055 required when construction completed.
ARM Rate
Information
  • Not applicable.
Borrower Eligibility
  • Individuals only, Fannie Mae guidelines.
  • See Resident Alien
  • No trusts, corporations, or other business entities.  No estates.
Condos/PUD
  • Not applicable.
Co-Signer
  • Not allowed
Credit Score
  • Minimum FICO Score of 700 required for 80% LTV.
  • Minimum FICO Score of 680 for 75% or less LTV.
  • Must use middle of three and lower of two borrowers to determine FICO score.
Downpayment
  • 20% Equity (700 score)
  • 25% Equity (680 score)
Escrow Holdback
  • Not allowed
Exceptions
  • See Exceptions int the Internal Procedures section of the General Guidelines.
    • Complete Exception Request Form

NOTE: All exception request for OTC Lot Loans are decisioned by Construction Lending Department.  Please fax Exception Request Form and required documentation to (480) 730-3559.

Fees
  • 1% fee to Construction Lending to be collected at closing.  This fee will be credited back to borrower at time of OTC loan closing.
Gifts
  • Allowed
  • See Gifts/Grants in the Assets section of the General Guidelines.
    • See also Sample Gift Letter
Homebuyer Education
  • Not applicable.
Investment Property
  • Not allowed.
Leasehold Estates
  • Not allowed
Loan Amount
 Minimum:
  • $35,000
Maximum:
  • $150,000
  • >$150,000 on a prior approved case-by-case basis
Mortgage Insurance
  • Not applicable.
Non-Occupant Co-Borrower
  • Not allowed.
Number of Properties
  • Only one FHHLC lot loan is allowed per borrower.
  • See Number of Loans in the Underwriting Policies sections of the General Guidelines.
Occupancy
  • Primary Residence, 1 unit.
Prepayment Penalty
  • None
Property Types (Eligible/Ineligible)
 Eligible:
  • Property for Single Family residence only (1 unit)
  • See Acreage
Ineligible:
  • 2-4 Units, Manufactured Homes, Condotels, Mixed Use property, or any property to which title will remain with the seller.
  • See Ineligible Properties in the Property section of the General Guidelines.
Purpose
  • Purchase transactions only.
  • Lot acquisition only.
Ratios
  • Qualifying rations: Most meet projected first lien program guidelines.
  • As these loans are only for those borrowers intent on building a custom home in the future, loans must be underwritten so that the land loan is carried over the term of the loan and the ability of the borrowers to proceed with building a custom home.
  • Issues include the projected costs of the new project, sources for additional downpayment, the intended disposition of the current residence, and the projected future ratios.
Refinance (Cash-Out)
  • Not allowed.
Reserves
  • 9 months cash reserves required after closing based on lot loan (interest only).

General Guidelines:
  • In addition to FICOs, Borrowers will be "pre-qualified" for a maximum OTC loan based on the assumption that the value of the land is 1/3 of the value of the future project.  For example:
Lot Cost or Value: $100,000
Lot Loan:
 $ 80,000
Down Payment:
 $ 20,000


Future OTC Loan:


Lot Value:
 $100,000 (1/3 of value)
Construction costs:
 $200,000 (2/3 of value)
Total transaction:
 $300,000