Construction Loans.
House hunting is incredibly difficult these days. In many areas there are more buyers than houses that are available for sale. The high demand and lack of supply has driven up the prices. Buyers are getting into bidding wars with each other, which is raising the prices even further. You may not even find the perfect house that fits all of your needs. Even if you do, it’s going to be overpriced. However, the good news is there is a perfect solution to buying a second-hand house.
You can either build a brand-new home or renovate your existing one. Either way, you’ll end up with exactly what you want. You won’t need to overpay for it, and you certainly won’t need to settle for something that you truly don’t love or even really want. You do need to be aware of the fact that a new construction loan or renovation loan is a bit different than applying for a mortgage to purchase an existing property. Here’s everything you need to know about obtaining a construction loan from us…
How It Works.
Our unique program provides borrowers with the ability to obtain a construction loan that will automatically convert into a standard 30-year fixed rate mortgage once the construction process is complete. In essence, it’s a one-time close where you secure the construction loan, secure the long-term mortgage, and lock in the interest rate for the long-term mortgage upfront. The construction loan is based on “interest only payments.” That means you only need to pay the interest on the construction loan while your home is being built.
In addition, you only pay interest based on the funds that have been released instead of the full amount of the construction loan. The builder or general contractor receives funds from the bank when they hit certain milestones in the project. For example, they may receive funds from the construction loan when the foundation is completed, or the framing work is done. The builder or general contractor has up 12 months to complete the project from start to finish.
Once the construction phase is complete, your loan automatically converts into the standard 30-year fixed mortgage with the interest rate that you locked in at the very start of the process. It makes perfect sense to lock in your 30-year fixed interest rate now because interest rates are projected to rise in a significant manner over the next twelve months.