What is a construction loan?

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A construction loan is a type of mortgage that allows the borrower to build their own home.

The borrower has greater control over the model and style of the residence, and may select every detail of the residence.

In order to receive financing or a mortgage, the borrower must pay a down payment to the creditor.

This amount must be, at minimum, 5%. DTI from 35% to 43%

 

Requirements:

• Credit score of at least 680

• Employment history and earning analysis

 

Typically, only the interest is paid during the construction period. Once construction is complete, the remaining amount of the loan becomes a normal mortgage. Some of the cost is paid in advance in increments during construction, according to the progress of the construction.

 

There are two primary types of residential construction loans:

1. Construction-to-permanent: you request a loan to pay for the construction. When you move into the residence, the bank converts the rest into a permanent mortgage. In other words, this is two loans in one.

2. Stand-Alone Construction: your first loan pays for construction. When you move in, you receive a mortgage to pay for the construction debt. IN mother words, this is two separate loans.

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To learn more about available construction loan programs, please contact us.

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We are available to answer any of your questions.