5. Construction Permanent Mortgage Documentation Requirements

Introduction

This topic contains information on the documentation requirements for closing and endorsing a construction permanent mortgage loan, including

•	documentation requirements for closing, and

•	documentation required prior to endorsement.

Change Date

May 10, 2009

4155.1 6.A.5.a Documentation Requirements for Closing

Standard FHA documents are used when closing a construction-permanent mortgage loan, with the addition of a

•	Construction Rider to the Note, and

•	Construction Loan Agreement.

These construction documents may be in any form acceptable to the lender, but they must provide that all special construction terms end when the construction loan converts to a permanent loan.

After conversion, only the permanent loan terms (using standard documents) continue to be effective, making the permanent loan eligible for FHA mortgage insurance.

4155.1 6.A.5.b Documentation Required for Endorsement

Prior to endorsement, the lender must obtain

•	a certification, signed by the borrower after conversion to the permanent loan, that the mortgaged property is free and clear of all liens other than the mortgage

•	verification that the construction loan has been fully drawn down

•	copies of canceled checks and paid receipts for all the borrower's out-of-pocket construction costs, and

•	all property related requirements for new construction.