Construction Loan Guarantee Program
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What to Know About the Construction Loan Guarantee Program
The objective of the Construction Loan Guarantee Program is to provide construction loan guarantees to Lenders for contractors who build affordable single-family housing in communities with a documented need for additional affordable housing in their area.
Guarantee Amount
SD Housing will guarantee up to 50% of the total construction loans made to an individual contractor.
Maximum Guarantees Per Contractor
No more than 5 single family, owner-occupied units under construction, or completed and pending sale, at one time.
Maximum Guarantees Per Community
No more than 25 guarantees may be active in a community at one time.
Maximum Loan Amount
Construction loans provided by the Lender may not exceed 85% of the total value of the housing unit (including lot and improvements), not to exceed costs.
Fees
SD Housing will charge 0.5% of the loan amount.
Appraisal
Required before construction. Maximum sales price cannot exceed the current SD Housing First-Time Homebuyer purchase price limits. If the contractor intends to sell the property to a buyer who will insure their mortgage through FHA, VA or USDA rural Development, the property must meet HUD/VA minimum property standards, including Model Energy Standards. If the intended buyer will obtain conventional financing, the property must meet HUD/VA minimum property standards, except those relative to energy.
Administration
SD Housing will request that the lender do all underwriting relative to the construction loan, provide 100% of the funds, and perform all payouts, inspections, and other required administrative functions relative to mortgage insurer requirements.
Repayment
Interest on advances must be collected no later than 6 months after closing the construction loan, and monthly thereafter.
Construction Loan Interest Rate
The lender reserves the right to renegotiate loan interest rate every six months.
Guarantee Payment
Payment to the lender under the guarantee will be made at 50% of the net loss after sale of the property by the lender, in an amount not to exceed the original amount of the guarantee. SD Housing must be notified of pending loss within 12 months of the date of the first draw under the construction loan.