You have been thinking about taking a big step and building a new home from the ground up.  You’ve already made many decisions such as the location, builder, architect, size and style of home you will build.  But how do you find financing to build a new home? Even though you may not be sure where to start, it is possible to find easy home construction financing when you know where to look.

Typical Bank Construction Loans

Many banks only offer traditional mortgage financing and regular construction loans.  So folks who wish to build homes must obtain a short-term construction loan of either six or twelve months to get started.   Upon completion, a second loan—a traditional mortgage—is secured to pay off the construction loan.  Two applications, two loans, two closings and two sets of closing costs does not make for easy home construction financing, though, does it?

Stand-Alone Construction Loans

With a stand-alone construction loan, you only get the construction loan itself without securing long-term financing for afterward. This means that once the project is done, you will need to apply for a separate mortgage, which means a separate closing process and a chance that you might not be approved. There is also the uncertainty of interest rates that could go up before construction is complete.

Home Construction Financing Alternatives

The good news is that there is an alternative.  Some mortgage lenders, such as Anna DeCamp at First United Mortgage Group, offer construction-to-permanent loans for those who are building a new home.

This loan finances the building of the home, over six to twelve months, just like a regular construction loan.  The borrower only pays interest during construction, and cash is disbursed in measured payments–called draws–as various phases of the home are completed.

When construction is finished, the loan converts to a traditional mortgage. There is only one application process, one closing and one set of closing costs.   That’s why this loan is also called a one-time-close construction loan.

Home Construction Financing Rates

The borrower has the option to lock in the interest rate before construction starts, or choose a float-down option if interest rates are expected to go down.  The float-down option adds risk for the lender so adding this feature to the loan will cost the borrower a little more.  But the extra cost may be worth it to have the assurance that you will get the lowest possible rate.

And did you know that you only need a 680 credit score to qualify? How’s that for easy home construction financing?   To get started with your construction-to-permanent home construction loan, call Anna DeCamp at (972) 629-0890.