Construction Loans

Are you looking at building a home? If the idea of building your own home excites you, the first thing you need to do is familiarize yourself with the types of construction loans available in today’s market. Learning the basics of a construction loan will prepare you when it’s time to decide to build your own home.

A Conventional Construction-to-Permanent mortgage is mainly used to finance the building of the borrower’s home and permanent mortgage all into one individual transaction with a single closing. The borrower is going to be approved for a standard Construction-to-Permanent mortgage if the borrower is already qualified for a long-term permanent conventional mortgage. Upon conclusion of construction, the borrower is going to be expected to convert from the interim construction loan right into a permanent standard fixed-rate loan. There’ll be no other closing or even closing costs required.

Types of Construction Loans:

• Progressive Disbursements: Construction loans disburse funds in phases, with payments made directly to contractors and suppliers as work is completed.
• Interest-Only Period: During the construction phase, borrowers typically make interest-only payments on the loan, which helps manage costs.
• Conversion to Mortgage: Once construction is complete, the loan can be converted into a traditional mortgage, allowing borrowers to start making principal and interest payments.