We understand the construction-to-permanent financing process can be cumbersome and we are here to help!
Here are the answers to the most commonly asked questions we have encountered over the past 25 years.
Libra Enterprises, LLC dba Construction Financial Solutions is licensed under the laws of the State of Texas and by state law is subject to regulatory oversight by the Department of Savings and Mortgage Lending. Any consumer wishing to file a complaint against Libra Enterprises, LLC dba Construction Financial Solutions should complete, sign and send a complaint form to the Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, Texas 78075. Complaint forms and instructions may be downloaded and printed from the Department's web site located at sml.texas.gov or obtained from the Department upon request by mail at the address above, by telephone at its toll-free consumer hotline at 1-877-276-5550, by fax at 1-512-475-1360 or by e-mail at email@example.com.
The Department maintains a recovery fund to make payments of certain actual out of pocket damages sustained by borrowers caused by acts of licensed Residential Mortgage Loan Originators. A written application for reimbursement from the recovery fund must be filed with and investigated by The Department prior to the payment of a claim. For more information about the recovery fund, please consult The Department's website at sml.texas.gov.
National Mortgage Licensing System Registry #1771431. Construction Financial Solutions is located at 18568 Forty Six Parkway, Suite 3002, Spring Branch TX 78070.
Lenders are required to provide the "Your Home Loan Toolkit", which has been provided by the Consumer Finance Protection Bureau created to comply with federal law pursuant to 12 U.S.C. 2604, 12 CFR 1024.6, and 12 CFR 1026.19(g). This is for all loan transactions effective 10/3/2015.
Are there different types of Builder Contracts?
Yes! A Builder's Contract will either list one base cost for construction of the home [Fixed-Price] or will include an estimate for costs plus a flat Builder's fee as either a number or percentage [Cost-Plus]:
How can the Builder be approved with CFS?
CFS will require the Builder complete a Profile. CFS will contact the Builder's previous clients to ensure they were happy with their experience, yet CFS does not review a Builder for quality or become involved with contract negotiations. It is the Homeowner’s responsibility to perform due diligence on the Builder to ensure they are satisfied the Builder has experience, financial integrity and stability to complete the improvements agreed upon by the Homeowner and Builder.
What is a draw?
A draw is a request to have funds disbursed from the construction loan. The disbursements are intended to cover specific expenses incurred during the construction of the home. These items correspond to the items listed in the Builder's Construction Budget.
How do I request a draw?
A Construction Draw and Disbursement Schedule may be included in the Builder's Contract. Click HERE for the complete Draw Disbursement Instructions.
Is the Builder limited to how many draws they can take?
No but we do request they be limited to 1 per week. Mutual agreement on the number of draws the Builder will submit to CFS for payment should be included in the contract. Draws that include labor must pass an informal on-site inspection for percentage of completion. Draw inspections are for verification of completion only, not code compliance or quality. Each inspection costs $100 per site visit. These fees are either paid by the Builder or the Homeowner. If requested disbursements are wired directly to a bank account or sent by FedEx, a fee of $30 is applied to each transaction. These charges are automatically applied to the payoff on the loan unless otherwise indicated on the Loan Approval Acknowledgments.
Is the Homeowner's Draw Approval Required?
CFS does not require draw requests be approved by the Homeowner prior to processing, as the level of Homeowner involvement in the construction varies with each loan. It is an agreement between the Builder and Homeowner if Homeowner draw authorization is required prior to processing.
What happens if I go over budget?
Sticking to the Construction Budget is extremely important. If the contract between the Homeowner and Builder is a Fixed-Price Contract, if CFS determines a draw request is for an amount over the initial budgeted amount, only the budgeted amount will be paid and the Builder must cover the difference unless there are savings within the budget for items that have been confirmed 100% complete. If the contract is a Cost-Plus Contract, the Homeowner must cover the difference unless there are savings within the budget for items that have been confirmed 100% complete.
What if I want to make changes during construction?
Making changes during construction can create problems if not handled properly. Major changes to the project must be agreed upon by both Homeowner and Builder through a Change Order and approved by CFS prior to the change being made. If possible, the changes may be included in the Construction Budget and paid as part of ordinary draw disbursements. In some cases it will be the Homeowner's responsibility to pay for any changes made to the original home floor plans and/or specifications.
When should I inform CFS of changes that I want to make?
You should contact CFS immediately after determining a change is desired or required. That will give us an opportunity to determine the best course of action to take in regards to paper work, inspections, draw requests, etc. The sooner you notify us of changes, the smoother your project will go.
Can I get an extension of my construction loan term?
Typically all Builder Contracts specify the time needed to complete the home: 6 months [180 days], 9 months [270 days] or 12 months [365 days]. The time specified is for actual active construction, and does not include the time needed to obtain HOA approvals and city permits, or delays caused by weather or unforeseeable events. The total amount of time from loan approval to mortgage refinance should be agreed upon as it will determine the term of the construction loan.
If progression of construction is delayed beyond the agreed timeline, the Homeowner may incur additional costs, including Loan Modification and Extension Agreement legal fees and recording fees, as well as interest on the construction loan. In the event delays occur, the contract should detail who will be responsible for the additional costs. If a Modification and Extension Agreement is needed, on average the cost is $150.00 which includes the lawyer's fees and county clerk recording fees.
What is Retainage?
Retainage, or Builder's Hold-Back, is the portion of a Builder's Contract that is not covered by the construction loan. If a mandatory hold-back is not required by the construction loan, the borrower may still require a 10% hold-back of the Builder's contract until the home is completed and the home obtains the Certificate of Occupancy and is refinanced into permanent financing.
How is interest calculated and paid during a construction loan?
Interest is charged on disbursed balances, not the whole loan amount. Borrowers are billed on the 1st of every month for interest due on their loans. CFS reserves the right to discontinue disbursement of draw funds if interest payments are delinquent.
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