Loan Programs
Construction Loans
Construction loans include Land/Lot Purchase Loans, Home Construction Loans, Construction to Perm Loans and Remodel/Equity Loans as well as others. In all cases the funds are directed towards constructing a new home or remodeling an existing home. Construction Financing is a specialized field, not just any Loan Officer has the knowledge and expertise needed to adequately complete the construction finance process.
Construction loans differ from other mortgage loans in that the loan amount is derived from a combination of cost to construct and estimated market value at time of completion. There also is a construction period (typically 6, 12, or 18 months) where money is being drawn from the total loan amount to cover materials and labor based upon completions milestones. During that period interest-only payments are required. At the end of the build period and when final inspection is approved (occupancy permit is received in many cases) the construction loan is either due and covered by another typical mortgage loan or the borrower has acquired a Construction to Perm loan which does not require follow-up refinancing but automatically converts to a permanent loan.
Not everyone can qualify for a Construction loan. Credit requirements are usually higher than with other loans programs. Income requirements are also higher since many times people are building a home but still have housing costs in addition to the construction loan payments. And down payment or vested ownership value needs to be higher than normal loans due to the risks of home construction, cost overruns and other factors. There is also a lot of additional paperwork required to obtain a construction loan such as construction contracts, material lists, blue prints, construction cost forms and many others.
Be sure to turn to the experts on Construction Lending. Contact Us for more information on Construction Loans. We are here to help.