Texas Home Lending News

Construction Loans

March 7th, 2022 12:13 PM by Shawn Smith NMLS#863501

Let’s talk about construction loans.

If you choose to work with a builder to construct your new home, the financing will work a little differently than with an existing home.

How do construction loans work?
Once all plans, permits and contracts are approved, the lender advances money to your builder on a set schedule. Cash follows each step of the construction process from clearing the land through completion.

How much does it cost?
As with any mortgage loan, costs vary based on loan amount, customary closing expenses and interest rates. Interest charges accrue only on the outstanding balance. That means monthly interest charges start low and advance as construction progresses.

What happens when the house is done?
This depends on your loan.

If you have a simple construction loan, you will pay it off by refinancing with a new mortgage loan.

Construction-to-permanent loans make this transition automatically. The first stage behaves just as a construction loan then is modified into a conventional loan once your home is complete.

Which is better?
This really depends on you.

With the simple construction loan, you may have more flexibility in selecting your permanent loan type when the time comes.

The construction-to-permanent loan may allow you to lock in your final interest rate at the very beginning. You'll be protected if rates rise during the construction process.

How long does it take?
The length of the loan process depends on many factors, including the status of plans, permits and approvals. Once all documents are in hand, the review period is similar to that of any mortgage loan. It will go most quickly if you've gathered and provided your documentation ahead of time.

When you’re ready to get started financing your new home, please reach out. We’ll be sure you’re prepared and have your questions addressed.

Shawn Smith
MLO/Broker | NMLS # 863501
(214) 396-3650 | Mobile: (817) 706-8619
shawn@sublimefinancial.com

www.sublimefinancial.com
Sublime Financial, LLC
14785 Preston Rd Dallas TX 75254

NMLS # 1134044

Posted by Shawn Smith NMLS#863501 on March 7th, 2022 12:13 PM

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