The Two Main Types of Construction Loans
You have decided to build your dream home. You found the perfect lot. You have hired the best builder and now you need the loan. Construction loans are different from a traditional mortgage, and we will give you the basics to get you started. There are two main types of construction loans, Construction-Only and a Construction-to-Permanent loan.
Construction-Only loans are exactly what the name says. Your lender gives you a loan that covers construction costs. Contractors are paid directly by the lender on a flexible draw schedule. During construction, you pay a monthly interest-only payment on the money drawn from the loan. Once construction is complete, you will pay off this loan or refinance it into a conventional mortgage.
A Construction-to-Permanent loan is the second type of construction loan. This loan is very similar to a Construction-Only loan. The one major difference is at the end of the construction period, the Construction-to- Permanent loan will automatically convert to permanent financing. You only have one closing and only one set of closing costs.
These are just two of the basic types of construction loans, if you are interested in building your next, home talk to a Mortgage Expert to find which type of construction loan is the best product for you. Contact one of our Mortgage Experts by calling us at (877) 773-6605 or send us a message today.