A short-term loan that a lender makes for the construction of homes and buildings. The funds are disbursed in the stages of the construction.
One of the most popular construction loans is the Construction-to-Permanent loans which allows a one-time close.
The one time close loan is also known as a construction to permanent loan. It allows a borrower to lock in lower interest rates at the time of construction.
There are lenders who will not need to be so concerned with the builder's credentials as much as they will just want to know they builder is a licensed or registered builder. Also with some programs you can minimize you out of pocket expense if the land value will appraise for more than you purchased it. These programs will typically allow 80% of land value versus the purchase price of the land.
A interim loan for financing the cost of construction, usually set up for the short-term. The lender, in periodic intervals, will make payments to the builder based on how the work progresses.
There are many options on getting a construction loan. A loan officer can help you decided what construction loan is right for you.
A construction loan will payoff anything that you owe on your land and they may take the equity and carry that over to the construction. This may allow you to construct a home for no money out of pocket or 100%.
The underwriting procedure of a Construction Loan is different from that of a purchase mortgage or refinance. One distinct difference is in that the lender, in addition to examining the borrower's loan qualifications, often scrutinizes the contracted builder's experiences in building structures similar to the subject property.
Many lenders offer "one time close" construction loans. This type of loan offers financing for land acquisition and the actual home construction. When construction is completed, the one-time-close construction loan turns into a permanent mortgage. "One Time Close" loans offer homeowners the convenience of not having to re-qualify for a mortgage after the construction phase, and save homeowners the closing costs of refinancing.
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