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A construction loan is a temporary financing solution designed to cover the costs associated with building a real estate project. While the majority of our lenders specialize in residential construction loans, we also partner with select commercial construction loan providers. These loans come in various forms, including conventional, unconventional, rehab, home improvement, one-time close, and construction-to-permanent options.
Construction loans serve diverse purposes, encompassing funding for additions, remodels, or the construction of new homes. In new home construction projects, funds from the construction loan are released gradually as the home takes shape since the final collateral hasn’t been established. Essentially, the construction loan operates akin to a sizable line of credit, starting with a zero balance before the project commences.
The Construction to Permanent program integrates the construction and permanent phases into a single loan and closing process, reducing closing costs and streamlining financing. It provides the convenience of securing permanent financing before construction begins and safeguards against rising interest rates during construction with a guaranteed rate for up to a 12-month period. Moreover, having both interim and permanent financing handled by a single lender simplifies the financing process, offering construction and permanent financing in one straightforward step!
As work progresses, funds are disbursed to cover expenses for labor and materials, incrementally increasing the loan balance. During the project, interest is only paid on the amount utilized, not the entire construction loan, easing financial strain, particularly if you’re still managing existing housing expenses or in the process of selling your current home.
Upon completion, the construction loan is typically paid off by a new mortgage obtained either concurrently with the construction loan or through a separate mortgage agreement. This marks the commencement of regular payments over the loan’s term—whether it’s 15, 20, or 30 years.