5 Things You Need To Know About Construction Loans


Finding correct advice on Construction Loans can be a difficult . The net has made this process significantly less difficult and definitely faster than it used to be. That being said, when you are seeking info on the web, the quantity of information available can be too much. To make the process of finding information much simpler, we've simplified it to the 5 important aspects you need to understand about Construction Loans.

Construction Loans

Under Construction
Under Construction


  1. Variable Rates: Construction loans are used to finance new home consturctionand are typically variable-rate loans that have interest only payments during the construction phase. Money to pay for costs is drawn out on a schedule based on the stages of construction.
  2. Underwriting: The underwriting procedure of a construction loan is vastly different and more complex than that of a purchase or refinance mortgage. The most distinct difference is that the lender examines the borrower's loan qualifications and verifies the builder's experiences in building structures similar to the subject property.
  3. 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.
  4. Future Value: Construction loans allow you to be able to borrow funds based on a percentage of the future value of the house. This is regardless of how long you've owned the lot and the total construction costs.
  5. Not Permanent Financing: During the construction phase, the loan is typically variable rates. Permanent financing in the form of fixed rate or adjustable rate mortgages are available only after inspection and completion of construction.

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