Construction Loans - Generally speaking, there are 3 different types of construction loans. They are:

• Spec Home
• Owner Builder
• Custom

Now some of these programs offer you a permenant option which means that after the home is completed, you can then convert the program into a 30 year mortgage.

Construction loans usually use LTV and LTC calculations when determining if you can qualify for the loan. LTV stands for Loan To Value and LTC stands for Loan To Cost. LTC is the amount that the bank will lend you based upon the total cost of the new home. For example, if you estimate that it will cost $200,000 to buy the lot and build the home, and the bank will only loan you 90% LTC, that means they will only give you $180,000 to build the home. You will have to come up with the remaining 10% in cash as well as pay for all of the closing costs.

Usually, you will get better rates and higher LTV and LTC if your applying for a Owner Builder program. But if you are planning on selling the house for a profit and NOT occupy it as your primary residence, save your self a headache and apply for a Spec Home Loan.

Most of the loan programs will allow you to include the cost of the land into the loan.

If you own land outright, it is often possible to get a construction loan with very little money out of pocket. If you own land and would like to build, then contact us today.

It is not imperative that you have great credit to get a construction loan. There are programs for construction with credit scores as low as 620.

There are now programs called construction-to-permanent loans. In these loans, once the construction is completed, at no extra cost you may choose which type of loan it is converted(i.e. 30 year fixed, 10/1 ARM, 5/1 ARM, 3 year interest only ARM, or even an Option ARM.)

If you own, but would like to build a custom home, it sometimes possible to build without much cash. You may take a loan out of your current home in order to build. This special type of bridge loan allows you to get a loan in which you make no payments until your new house is built or your old home is sold.

Construction loans are usually variable-rate loans priced at a spread to the prime rate or some other short-term interest rate. You, the contractor and the lender establish a draw schedule based on stages of construction, and interest is charged on the amount of money disbursed to date

Construction-to-permanent financing is giving you a mortgage so you can replace the construction financing that you got to fund the construction of a new residence. The transaction may be considered to be a purchase or a refinance.

Some construction loan lenders require that the builder is experienced. These lenders often ask for a list of homes the contractor has built as part of the underwriting requirement.

During the construction period of the loan draws are taken after work is completed. The borrower makes an interest only payment on the loan amount that has been used. It is also recommended to use a one time close for a couple of reasons. The two main reasons are closing costs are cheaper and if the borrower's credit situation changes they do not have to worry about getting approved for another loan.

Construction Loan - A short-term loan that a lender makes for the construction of homes and buildings. The funds are disbursed in the stages of the construction.

One of the most popular construction loans is the Construction-to-Permanent loans which allows a one-time close.

There are many options on getting a construction loan. A loan officer can help you decided what construction loan is right for you.

The underwriting procedure of a Construction Loan is different from that of a purchase mortgage or refinance. One distinct difference is in that the lender, in addition to examining the borrower's loan qualifications, often scrutinizes the contracted builder's experiences in building structures similar to the subject property.

A construction loan will payoff anything that you owe on your land and they may take the equity and carry that over to the construction. This may allow you to construct a home for no money out of pocket or 100%.

A interim loan for financing the cost of construction, usually set up for the short-term. The lender, in periodic intervals, will make payments to the builder based on how the work progresses.

Many lenders offer "one time close" construction loans. This type of loan offers financing for land acquisition and the actual home construction. When construction is completed, the one-time-close construction loan turns into a permanent mortgage. "One Time Close" loans offer homeowners the convenience of not having to re-qualify for a mortgage after the construction phase, and save homeowners the closing costs of refinancing.

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.

There are lenders who will not need to be so concerned with the builder's credentials as much as they will just want to know they builder is a licensed or registered builder. Also with some programs you can minimize you out of pocket expense if the land value will appraise for more than you purchased it. These programs will typically allow 80% of land value versus the purchase price of the land.

Construction loans - Construction loans are very different than standard mortgage loans. There is much more than just approving the borrowers credit, assets and liabilities. The project itself must be approved as well.

Construction loans generally can be done with a one time close before construction commences on the proposed property or with a two step closing done. Rates are usually locked for approximately 6-12 months on a construction loan. The longer the rate lock however the more the rate lock will cost though for a consruction loan.

Construction loans are sometimes variable-rate loans priced at a spread to the prime rate or some other short-term interest rate. You, the contractor and the lender establish a draw schedule based on stages of construction, and interest is charged on the amount of money disbursed to date.

Some homeowners use construction-to-permanent financing programs where the construction loan is converted to a mortgage loan after the certificate of occupancy is issued. The advantage is that you only have to have one application and one closing.

Construction loans are usually short term interim loans for covering the cost of construction. The lender pays funds to the builders at predetermined times based on the progression of the project.

Construction loans have higher upfront costs than a standard conforming mortgage. The lender views these loans as higher risks with shorter terms and in return charge more money up front to close.

Most construction mortgage lenders stipulate that the contractor or builder be experienced in building the subject property. Many lender banks require a list of similar type of homes the builder constructed as part of underwriting documents.

With a construction loan the builder will receive pre-established draws at certain stages of the construction. You will normally begin making interest only payments on those draws as construction continues. You will only pay on the money that has been give to the builder, not the total amount. By the lender providing predetermined draws to your builder, this helps protect you the buyer that your builder doesn't just run off with all of the funds and stop building your home. Usually inspections will need to be done at the predetermined stages to make the sure the work that is supposed to be done is completed also before providing the builder with the next draw.

With some construction to perm financing or known as the one time close you will have a variable rate during the consturction phase. It then converts to a fixed rate longer term loan like a 20 or 30 year fixed rate. And there is usually a cap or stop point on the adjustable time period of the construction phase. This cap is set according to how long the building phase will last. For instance if you only need 6 months you might have a cap of .5% which means your rate for your permenant financing will not go any higher than 1/2% of your start rate.

Many lenders require a 5% down payment with a construction loan. This may come from the equity that you have in the land or money that you have on hand.

Construction - Construction loans are used to finance the building of a new home rather than purchase an existing home. They are usually variable-rate loans that have interest only payments during the construction phase. Draws are scheduled based on the stages of construction to pay the builders.

Construction loans are not intended to replace your mortgage over the long term. Permanent financing is available upon completion of construction, replacing the construction loan and allowing you to obtain a fixed rate, adjustable rate, or even option arm or negative amortization mortgage.

Construction Loan - A construction loan is a temporary loan, usually up to 3 years, where the lender will provide you financing to build your home. You usually will need to already have the land owned, so they can build and already have the proper permits in place. When your construction loan is complete, you can now receive permanent financing ( a mortgage ) from any lender. Usually if you will do the permanent financing with the same lender, you will not be charged closing costs a 2nd time

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