Construction-to-Permanent Loans are used to finance the labor, materials, and build of the house. Once the house is built, the loan rolls into the mortgage. Qualifying standards are more difficult, and rates under this type of loans are a lot less flexible than other loan types, such as construction-only loans. But unlike construction-only loans, construction-to-permanent loans saves the headache of building your dream house by securing the logistics into a single transaction.
The Process
Homebuyers will need to gather documents for builder information, plans for the house, and insurance before they start the construction loan process. There is only one application needed to qualify for financing. This means one disclosure for the processing and close of the loan.
Once everything is secured, construction begins. Lenders are much more meticulous during the construction phase since there is a higher level of risk. For every disbursement of funds, an inspection is required. Once construction is complete, a final inspection takes place and the loan becomes a regular mortgage that functions the same way a conventional, FHA, VA, or USDA loan functions.
Is Construction-to-Permanent Loan right for the Project?
Rates are set from the beginning of loan approval. Although homebuyers aren’t able to look for better rates during the build phase, they won’t have to worry about fluctuations in the market. It all depends on if buyers want the ease and security of one loan to build their dream home.
