12.26 INTEREST DURING CONSTRUCTION (05/17/17)

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

During construction, interest on the construction loan is payable monthly either directly from the borrower or indirectly drawn from an established interest reserve. Real estate taxes, property insurance premiums and the monthly amount of the annual fee (as applicable) due during the construction period may also be paid using the same draw process. Annual guaranteed fees will begin to accrue upon loan closing and will be due and payable each year upon the anniversary of the initial loan closing. If the borrower will pay these expenses directly, clear documentation that they possess the ability to do so must be demonstrated in the application package.

The borrower begins making regularly scheduled (amortized) principal and interest payments on the loan after construction is complete. Only interest payments on the advanced construction loan balance will be due and paid during the construction phase.