In Texas, many of us dream of one day building our dream home complete with all the features and amenities that we have always wanted. The not-so-dreamy part comes when we have to get the financing. Fortunately, a few lenders, such as Anna DeCamp at First United Mortgage, offer Texas new home construction loans that allow borrowers to secure the financing for the construction of their custom home, then convert the amount owed into a traditional mortgage.
Construction Loan Basics
First, let’s go over the basics of how most new home construction loans work. These are short-term loans that are used to finance a new home. During construction, the borrower receives amounts based on specific milestones (e.g. foundation completion, framing completion, drywall completion, etc.), and the borrower will usually pay interest only, until the project is finished. Once construction is complete, the typical short-term construction loan goes into repayment, so the entire amount is due at once. These loans are sometimes known as stand-alone construction loans.
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.
Construction-to-Permanent New Home Construction Loan
With a construction-to-permanent loan, the borrower qualifies for both the new home construction loan and a subsequent mortgage in one application and closing process. This not only makes the loan more convenient, but it can also reduce the risks of failing to qualify for the mortgage or of having higher rates after construction is over. And you save money because there is only one set of closing costs. For these reasons, many borrowers prefer construction-to-permanent new home construction loans.
Whether you are going for a stand-alone or construction-to-permanent arrangement on your Texas new home construction loan, you will need an experienced mortgage professional with integrity. Anna DeCamp at First United Mortgage Group has over 23 years experience in mortgage lending and has been named to the D Magazine’s “Best in Dallas” list for multiple years. To apply, contact Anna DeCamp today!