All There is to Know about Construction Loans

Unless you are made of money and you want to build a house or some sort of commercial structure, chances are you are going to need a loan. 

The type of loan you will need to attain is a construction loan, which is similar to home loans in that they are used to fund a property but the funds actually go toward the materials and development of a structure from the ground up.

This blog post covers all there is to know about construction loans, including terms and how to qualify.

A Breakdown of the Construction Loan

Let’s start by clearing the air -- there is no generic construction loan. Like home loans, every mortgage company you talk to is going to approve you for a different amount and interest rate. 

At Indigo Mortgage, we always seek to deliver the best possible rates, but sometimes the determining factors do not always allow for the lowest interest rate available.

We do offer our Traditional Construction Loan, which our informative staff would be very happy to fully brief you on. In the meantime, here are some general terms about our construction loan products, which typically apply to all types of construction loans:

• Upon the completion of the construction loan, the remainder that is needed to be paid off will convert to a permanent finance loan, keeping things simple.
• You only need to qualify once. After the construction is completed, you don’t need to re-qualify to see if anything has changed where your interest rate and eligibility are concerned.
• There is only one closing.
•  The construction rate is based on interest only.
• A permanent 30-year rate is locked in at the beginning of construction; however, you are allowed to have a free float down option. This means that, if you are eligible, your construction loan rate could be reduced at some point over the construction period.
• With up to 90% loan to value, you may be eligible to borrow a majority of the cost to build.
• You can also buy land with the construction loan.

While this doesn’t quite fall under the construction loan, we also offer a rehab loan that is for remodeling homes if that is more of what you are looking for from a loan. 

For more information on the rehab loan and how that works, please feel free to contact us at Indigo Mortgage.

Posted by Indigo Mortgage at 3:24 PM 2 comments: