Construction Loans must be structured to include all the costs associated with building a new home:
The primary components of a construction loans are:
1)Land:The pay off of an existing land loan or the purchase of a new building lot will be included in your new construction loan.
2)Construction Soft Costs: consisting of house plans, engineering and permit fees, impact fees and other costs associated with building a new home often overlooked.
3) Construction Hard Costs: consist of all the materials and labor associated with new home construction, the hard cost will also include site work, grading, utilities and are broken down on a construction line item budget.
4) Construction Loan Closing costs: consisting of origination and lender fees, title, and closing fees, there are also some additional fees associated with the draw, inspections and construction loan administration.
5) Interest Reserves and Contingency Reserves: These reserves will help you through the construction loan process. The interest reserve give you and “no cash out of pocket” feature during construction, it’s a reserve account established to make your interest payments during construction. The contingency reserve will provide funds to cover any cost overruns.

Construction loans are based on Loan To Value (LTV) as well as Loan To Cost (LTC) Ratios. The total cost to build and the market appraisal will determine the construction loan to value and the construction loan to cost.

If you would like more information.....

In partnership with Charter Funding Construction Loans, InsurancePoliciesOnline.com is pleased to offer you a proposal for the required insurance on your construction project. There are two policies required in order to be able to close your construction loan. A premium quote for your project is attached to this cover letter.

Builder’s Risk Insurance - This is a property insurance policy that covers the structure and materials at the job site during the course of construction. Coverage is provided against such perils as fire, theft, vandalism, windstorm, etc. A builder’s risk policy is written for a maximum term of 12 months. The premium is considered fully earned and there is no pro-rated return should your project take less than the allotted 12 months. The policy is offered from Zurich Insurance Company, which carries an ‘A’ rating from A.M. Best.

Personal Liability Insurance - This policy provides protection to you for public liability as the owner of your new land. Coverage is similar to that provided under a standard homeowner’s policy (without the house). The policy protection applies to claims resulting from bodily injury or property damage to a third party arising out of the premises. This policy does not provide coverage for construction related activities. The liability for all construction related operations should be borne by the contractors performing the work. It is required that all work be done by properly licensed and insured contractors. Evidence of their insurance may be required. Coverage is provided by the Navigator’s Insurance Company, which maintains an ‘A’ rating from A.M. Best.

Important terms & conditions:
- Construction work must be done by properly licensed, experienced and insured contractors.
- An on-site construction manager must be provided.
- Premiums must be paid in full and all necessary documents provided before any coverage begins.