Construction and Construction Perm Loans

Building a home from ground up is the dream of many American families.     

A construction loan is a bridge or interim loan that is supplied for the time it takes to build the home.  The interest rates are slightly higher because the loan does not earn interest over a long period of time.

A permanent loan is required to cash out the construction loan after the construction is complete.  Most lenders require that you have qualified for the permanent loan and been pre-approved so that they are secure in lending the money for construction.  The funds are distributed in draws to the Builder. Your house plans and the Builder must be pre-approved or on the approved list of the lender. 

Because there are two separate loans you will be required to have two separate closings, with two settlement statements and two sets of closing costs.  Ask us to check with the permanent lender to see if some of the costs can be waived.

Qualify your Builder

It takes skill and a very competent businessperson to be an excellent Builder. If you have not selected a Builder it is a good idea to be pre-approved for the funding and ask the Lender for a list of pre-approved Builders in your area.  This could be an excellent referral source.  Be sure to secure several other references and check them carefully.  You will have a lot of money at stake.

You could be risking a great deal without a competent Builder.

Time is a Factor

Quality construction can be a time consuming proposition.  Make sure that you have the time to invest.  Builders are well aware of "Murphy's Law", everything will take twice as long as expected and if anything can go wrong, it will. Your Builder is at the mercy of suppliers, sub-contractors and Mother Nature. And, the completed work requires approval by independent inspectors, appraisers, etc.  The delays are a part of the process of construction. Your cooperation and patience is required.  So, before you start make sure you and your family have the time and patience that is required.

Save Money

Whether you are planning on building a new home or remodeling your existing home this mortgage program offers a one time closing for the construction loan and the permanent loan. Construction-Perm loans mean that you will have one settlement statement and one set of closing costs; it is easier and less expensive.  The closing costs are paid upfront, then once the home is completed the loan is modified to a permanent loan. 

The plans are pre-approved, the Builder is approved, and you the buyer are approved before the one and only closing.  You should expect that during the construction phase the interest rate would be slightly higher, however most loans of this type require that you pay interest only during the construction phase. 

Ready to Start?

Now that you have overcome all of the objections and you are ready to start let us help you through all of the phases of the Construction or Construction-Perm Loan.

Let the pride of your new home and the process of construction be a very rewarding experience.

Buying a home has never been easier!