Building a home is very exciting- but it can also get very expensive as well. This is where construction loans come in. They provide the funding you need to purchase land and pay for the materials/labor that are required for building a house.
There are several types of loans to choose from and the application/approval process is much more difficult than a traditional mortgage loan.
What are Construction Loans?
This is short-term funding that is used to cover the costs of building a new house from beginning to end. It covers the costs of purchasing the land, drafting the plans, getting permits, and labor/materials.
How Do Construction Loans Work?
Since this is a short-term loan intended to cover the building of a house, they typically have 12 to 18-month terms. In some cases, the money is used to purchase the land, but if you already own the land, you can use it as collateral. Sometimes your loan will convert to a permanent mortgage once the construction process is complete.
Once approved, you don’t receive all the funds at once. The lender will send payments to the builder through installments as various stages of construction are completed. Often, the lender will send an inspector before payment is sent.
Types of Construction Loans
There are several types of construction loans:
Construction-to-permanent
Construction-only
Owner-builder
Renovation
Interest Rates on Construction Loans
Often, the interest rates vary based on the creditworthiness of the borrower, the term of the loan, and the size of the loan. It’s also important to know that the rates are variable, which means they will adjust throughout the loan.
Choosing a Construction Loan Lender
There are lots of things to think about when you’re choosing a lender for your construction loan, so it is easy to get frustrated with the process. However, don’t settle for the first one you find. This is a very important decision, and you must make sure that the lender you choose meets your specific needs.
Triport Lending offers construction financing to ensure ample capital and healthy cash flow at every step of your project. Contact our offices today to learn more.