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Mortgage Loans

What is a Mortgage?

A mortgage is a legal document or contract that is signed by the owners (mortgagor) of a home. The mortgage is designed to assure the lender (mortgagee) that the borrower will repay the loan.

The mortgage pledges the house and property as security to the lender. It contains a legal description of property and a statement that pledges the property as security for the loan. The lending process also includes a promissory note that specifies the financial terms of a loan agreement. However, the word "mortgage" commonly refers to both parts of the loan agreement.

 

The Bank of Elk River Mortgage Team

Our first mortgage team effort allows the bank to provide a full offering of mortgages for our customers.  This includes Construction, Conventional, Reverse, FHA, VA and Non-conforming mortgages.

Michelle Eder manages our mortgage department.  In addition, she originates the secondary market loans.  These loans are sold to a secondary source and the customer makes their payments to them.

• Michelle's office is located at our Main Street location.  She can be reached at 763-241-8546.

The in-house mortgages are kept at the bank as part of our loan portfolio.  Payments for this type of laon can be made at any of our locations.  For more information on these loans, please contact:

Main Street Office:

• Mark Faydo at 763-241-8530
• Sue Engholm at 763-241-8561

School Street Office:

• Lee Schultz at 763-241-8563

Otsego Office:

• Neil Gagnon at 763-241-8584

Zimmerman Office:

• Bill LaVigne at 763-241-8558

Construction Loans

Construction loans allow people to finance and build their dream home. The borrower makes interest only payments during the construction phase, which typically runs up to six months in length. The amount of interest paid is based on the amount of principal that has been advanced.

Principal is advanced in the form of a draw on the construction loan. The borrower requests a draw to pay for expenses that are incurred as a part of the home construction. If the borrower does not own the property on which the house will be built, the first draw purchases the property. Future draws are made in sequence to cover the construction costs.

All draws are disbursed by a title company. The title company issues checks to the sub-contractors or suppliers. In return, the title company receives a lien waiver from the sub-contractor or supplier. This process allows for the title to the property to remain free of any liens and encumbrances.

Once all of the funds have been disbursed and the home is completed, the borrower will close a permanent mortgage and the construction loan will be paid off.

The Bank of Elk River strives to make this process as simple and easy as possible. We realize how stressful a building project can be, so let our experienced lenders help you make sound decisions.

Construction/Permanent Loans

A construction/permanent loan allows you to build a new home and close on your permanent mortgage at the same time. Close once; build the home with the construction loan; move in when it's completed and start with your monthly principal and interest payments.

A single close loan includes all the features of the construction loan and the permanent mortgage. It saves you time and money by eliminating a second set of closing costs. You do not need to re-apply or have the home re-appraised.

Construction Loan Frequently Asked Questions

What types of home construction financing does The Bank of Elk River offer?
What documentation is needed to apply for a construction loan?
What fees are associated with the construction process?
What can be done to the land prior to closing on the construction loan?
What needs to be done before funds can be advanced?
Who advances and disburses the funds from the construction loan?
How is an advance made on the construction loan?
How many draws can be made on the construction loan?
How long is the construction phase?
How are payments calculated and made during the construction phase?
Can I be my own general contractor?

What types of home construction financing does The Bank of Elk River offer?

• Construction Loans
• Construction / Permanent Loan

What documentation is needed to apply for a construction loan?
In addition to the standard Fannie Mae 1003 mortgage application you will need to provide plans, specs and a sworn construction statement for the home being built.

What fees are associated with the construction process?
A Good Faith Estimate will be provided within three days of submitting an application, which will include a breakdown of the fees that will be charged. Average fees range from 2% to 4% of the principal amount of the loan.

What can be done to the land prior to closing on the construction loan?
The only things that can be done prior to closing on the construction loan are a water percolation test, a survey, and staking out the placement of the house. It is extremely important that no labor has been performed on the property. (ie: cutting down trees, removing stumps, putting in a driveway, etc.)

What needs to be done before funds can be advanced?
The construction loan needs to be closed and the mortgage recorded before any construction can begin. A priority picture will be taken by the title company to ensure that no construction of any kind has begun. Prior to disbursement of funds, you will need to provide a copy of the building permit and hazard/builders risk insurance.

Who advances and disburses the funds from the construction loan?
The title company that issued the title insurance for your loan will handle the disbursement of funds. The bank is always available to help with any of the financing issues that may arise.

How is an advance made on the construction loan?
You will complete and submit a draw request form that we provide to you. We will approve the draw and notify the title company to make the disbursement to the contractor or sub-contractors.

How many draws can be made on the construction loan?
Generally, you will make three to six draws on the loan. We encourage you to keep the draws to a maximum of six. Signed lien waivers from the previous draw need to be turned in before we will approve another draw.

How long is the construction phase?
Our goal is for your home to be completed within six months. We will work closely with you to make certain the project comes in on time and on budget. If the project is not done on time there may be a charge to extend the construction phase of the loan.

How are payments calculated and made during the construction phase?
Required payments are interest only, based on the outstanding principal balance. A bill is mailed to you ten days before the payment is due. These payments increase during the term of the loan as the principal amount increases.

Can I be my own general contractor?
You can be your own general contractor upon approval by your lender. Typically, we require that you practice in the construction trades or have previously done the general contracting of a home.

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Contact a Mortgage or Construction Loan Lender

Loan applications will only be accepted from persons in the Greater Northwest Minneapolis / St. Paul Area. For more information about mortgage or construction loans:

• e-mail us at Loans@TheBankofElkRiver.com. Responses will be made during regular business hours.
• call Michelle Eder at (763) 241-8546
• call Stewart Wilson at (763) 241-8527