Question On New 1004 Form

[Cliff Salisbury]

Most of the new constructions sales in thia area have gone to the buyer purchasing the site from the developer first and than hiring a builder, who sometimes is the developer, to construct a house. In cases like this the transfer shows the borrower as the owner and the contract that I receive is for the improvements only.

My question is how are you handling the part on the 1004 form for the contract. It says I did, did not analyze the contract for sale. It also goes on to ask if the seller is the owner of record.

Above this is the assignment type. I am marking this other and puting construction loan.

Are most of you filling in the contract part as N/A, leaving it blank, or filling in something else?

 

[hastalavista]

Cliff-

I'm a little unsure of the scenario.
If the borrower owns the land, is your appraisal for the construction loan?
Or, are you doing a refinance appraisal, subject-to completion (the likely intended use is to obtain a conventional loan to replace the construction loan)?

 

[Mr Rex]

Denis, It might be construction to perm, one time closing etc. I don't consider it a refi either, since they are not refinancing the improvements. I'm sure a good case could be made to call it Refi, but I use the other check box as well and detail the contract for the improvements with the builder in the addenda, not on page 1. I do typically refer the reader to the comments about the builder contract in the "contract" section of page 1. I am sure others have different methods and thoughts.

 

[CANative]

Are you saying the borrower is the owner of the lot and may have purchased it a week ago or 10 years ago, but regardless is a closed sale, and now wants a loan to build a house?

If that is the case, I check the refi box and type "construction loan" in the blank line next to "other." I don't request a copy of a purchase contract.

If they are buying the lot and it has not closed yet, I check the "other" box and make the same "construction loan" comment in the blank line and I request a copy of the purchase contract.

 

[Mike Kennedy]

"buyer purchasing the site from the developer first"

Refinance, X other...."construction loan", "subject to completion per plans & specs..." MAKE sure you get plans & specs. ps.....the contract price between the lot owner and the "builder" has nothing to do with Appraisal Value which may or may not support the "Cost Price". :icon_idea:

 

[Cliff Salisbury]

The borrower has purchased the land, in this case six months ago. They are now applying for construction loan to build the house and it will become the permanent loan once the house is completed. I inspect the house for draws as it is completed.

I have been putting down that it is a refinace and than add the construction loan by other.

 

[Mike Boyd]

I think you have done the right thing. That is what I do. However, I do want to see the construction contract just to make sure nothing is left out like heating or A/C, paint or other issues. The lender wants to make sure they are financing a complete house, not a finish-yourself-project. Also, I want to see the builder's cost breakdown. The lender wants to make sure there is enough money to finish the house and pay off any land loans. Of course, the plans and specs must also be incuded.