Selling Guide

Published June 02, 2021

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How is a single-closing construction-to-permanent mortgage underwritten?

Underwriting Single-Closing Construction-to-Permanent Mortgages

The lender must underwrite a single-closing construction-to-permanent loan based on the terms of the permanent financing. If the permanent financing terms are modified, and no longer reflect the terms on which the underwriting was based, the loan must be re-underwritten, subject to certain re-underwriting tolerances. The loan data at delivery must match the data in the final submission of the loan casefile to DU.

As described in the table below, re-underwriting tolerances may be applied if the interest rate or loan amount was modified. (All other modifications require re-underwriting.)

Loan Term Modified Re-underwriting Tolerances
Interest Rate
  • For loans underwritten through DU: see the tolerances and resubmission requirements in B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report.
  • For manually underwritten loans: if the recalculated DTI (based on the change in rate or loan amount) does not exceed 45%, the loan must be re-underwritten with the updated information to determine if the loan is still eligible for delivery.

Note: If the increase in the DTI ratio moves the DTI ratio above the 36% threshold, the loan must meet the credit score and reserve requirements in the Eligibility Matrix that apply to DTI ratios greater than 36% up to 45%.

Loan Amount

For additional information, see B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions.

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