Michigan-based lender United Wholesale Mortgage (UWM) has introduced a construction-to-permanent loan that covers the cost of building a home and then converts to a permanent mortgage once construction is complete.
Starting February 1, UWM’s one-time close construction loans will be available on eligible 15- and 30-year fixed conventional loans and 7- and 10-year adjustable-rate mortgages (ARMs), the firm said Wednesday.
The loan will cover an 11-month maximum build period with a one-month modification. It is available for investment, primary and second home purchases as well as rate/term refinances.
“The streamlined process and certainty One-Time Close New Construction loans offer is unmatched and will set brokers up to be the hero with builders, real estate agents and contractors, and get their borrowers in their dream home,” Mat Ishbia, president and CEO of UWM, said in a statement.
This type of loan only has one set of closing costs to pay, reducing the borrower’s overall fees. It also has one interest rate with an automatic modification if the market improves once construction is complete, along with one down payment, one full credit report to order and one approval, according to the firm.
UWM will enable all involved parties to communicate information throughout the approval process, providing checklists for the project and builder approvals.
Once the loan is closed, UWM claims it will handle the rest of the process by staying in direct communication with the builder on subsequent draws, as well as subsequent inspections, to confirm the project is on pace.
The loan product is the latest offering from UWM, which has been ramping up its efforts to increase market share in a margin-compressing environment.
UWM – which took the origination crown from competitor Rocket Mortgage in the third quarter thanks to its aggressive pricing strategy – also took another big step recently to reduce prices in 2023.
The lender is offering a maximum of 40 basis points per loan to its brokers, with a total access to 125 bps, to gain market share.
While mortgage attorneys said the “Control your Price” initiative doesn’t appear to clearly cross the legal line, they raised compliance concerns — including rules that govern loan officers’ compensation; fair lending; and unfair, deceptive and abusive acts. These areas of compliance fall under the umbrella of regulators such as the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Housing and Urban Development (HUD), according to lawyers.
UWM’s deputy general counsel and chief compliance officer said there are “no unique regulatory risks with this program.”
UWM, which originated $33.5 billion in the third quarter, launched 2-1 and 1-0 temporary buydowns before expanding it to jumbo loans and recently announced a flat fee of $37.35 for credit reports.