Building a Home? You Should Know About the Construction Permanent Program

House Talk Episode 46 – All about the Construction Permanent Program with Bruce Hardy

Karen Malanga: Hi, this is Karen Malanga with another edition of House Talk.

I’m so excited to have Bruce Hardy here. Bruce has been in the lending business for over 30 years in Oregon. I find that amazing because you don’t look like you have been. But what a lot of experience you have under your belt.

So, Bruce, before we went on the air, you were speaking to me about the Construction Permanent Program. And I really feel that that information would be of interest to our listeners. Could you kind of go into that a little bit? And thank you for being here.

Bruce Hardy: Absolutely! And thank you for having me this morning, Karen.

Karen: You bet!

Bruce: So, the Construction Permanent Program is a relatively new program that’s available to people that are purchasing having a new home built. Generally speaking, it’s a custom type of a home where they go out and choose a builder and a set of plans, and they determine what house they want bill.

They come to the lender, and we’re able to close one loan for them that covers both the construction period while the home is being built, and the disbursements are made by the bank to the builder as the house progresses based on the percentage of completion.

And then, when the home is complete, it automatically rolls over into a long-term mortgage.

The advantages to the home buyer in this type of a program are that they are able to eliminate that second set of closing costs which can run in the thousands of dollars. But also, they’re able to upfront. When they make the commitment to have their home built, also, the bank will commit to them the interest rate that they’re going to have upon completion of the home.

Karen: That’s very significant because a bill can take 9 months, 12 months…?

Bruce: Yeah, we’re seeing 9 months to 12 months to build a custom home. And who knows what interest rates may do during that period?

Karen: And do they have to own the land or does your loan cover the land as well? Is it based on someone already owning land and then building a home? Or does the loan include the purchase of the land that the home is going on as well?

Bruce: Karen, it can work either way. We see a lot of people that come to us with land that they already own, that they purchased.

Karen: Sure!

Bruce: But we’ve also helped a lot of people with purchasing the land as part of the package deal with a bill job.

So, these loans, the Construction Permanent Loans can go up to a 90% loan to value. And sometimes, when you get into those higher loan to values, you have people that are actually using the loan to help them purchase the land as well.

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Karen: Yeah, I would think so, especially here in Bend. I mean, first of all, it’s hard to find land at this point in time. But I do have people that I know are house-hunting, they can’t find a home that they like, and they’re always saying, “Karen, maybe we should just build.” And your program would be perfect for someone like that.

Bruce: Yes. We’ve a lot of people come to us with that scenario. Typically, it’s a more custom-type of a home build. And they really want to know in this time of financial uncertainty that they want to have these costs and these interest rates pinned down ahead of time.

Karen: Yeah. So, you’ve been doing construction lending for 30 years.

Bruce: Ah, yeah. It doesn’t seem like it, but yes, it’s been a long time.

Karen: So, you’ve seen changes in our market. This seems like a really good program to me.

Bruce: I think it really is. It offers a lot of advantages. These Construction Permanent Programs that are out there just help eliminate a lot of the risks that borrowers used to take when they went and committed to have a home built.

Karen: And it also has the builder feeling secure too.

Bruce: Absolutely!

Karen: Yeah, they know everything is in place.

Bruce: The builder knows upfront that they’ve got the money to fulfill their contract set aside. So, when the loan closes, all of the funds necessary to complete the purchase of the land if necessary and to fulfill the builder’s contract, those funds are all accounted for before the home even starts.

Karen: That really sounds terrific. Bruce, thank you so much for being here today. I really appreciate you taking the time.

And with someone with as much experience as you, I know some of our listeners would love to have information about you and your program. Are there some marketing materials you could leave with me today that perhaps I could give to those interested parties?

Bruce: Absolutely, Karen. We have some marketing materials and some information, just basically a guideline. It’s a step-by-step product description that we could leave for you.

And of course, we are happy to meet with people at any time and do a prequalification for no charge and just help explain the complexities that are involved in the program and try to make it very user-friendly.

Karen: Thank you so much.

Bruce: Thanks for having me today, Karen.

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