One Close Construction
Unlike a typical mortgage loan, which finances an existing home, home construction loans are used to pay for both the construction of a home and the completed home. One construction loan option is the one-time close construction loan, which lets you finance both the construction and the mortgage on the finished home at the same time.
How Does It Work?
A one-time close construction loan has one closing date and one interest rate. Other types of loans have two or more closing dates and rates associated with each of the home building process. With a One Close Construction loan, the funds are paid out for each stage of the process and ownership. You will need to be clear about the construction time period and must state whether it will take three months or twelve months before the project can be completed.
After loan approval, the portion of your loan that covers the construction costs becomes available to the home builder. You will have several payment methods to choose from. You can choose make the funds available based on a “draw schedule,” where you allocate funds in advance and determine the when and how much the builder can be paid. Or, you can choose for the proceeds be paid based on when the builder requests funds for construction expenses. If you use a draw schedule, you may be able to schedule the payouts on calendar dates or based on the completion of certain tasks.
When your home is being built, you will make monthly payments and will have a choice how to pay your initial payments. You can begin making regular principal and interest payments, or you can make payments on the interest for the amount of the loan that was used. Once the construction phase is over, the loan is automatically converted into a regular mortgage, with regular monthly principal and interest payments, according to the terms allocated at the time of the loan.
How Do I Apply?
As with most traditional mortgages, you will need to submit copies of your credit report, income statements, and any other paperwork they would need to determine your financial security. It is also important to keep in mind that since the loan is a construction loan, you will also need copies of all the paperwork related to your construction project, such as a copy of your contract with the builder, a copy of the blueprints and the construction budget, and similar documents. Contact Mid America Mortgage Southwest today to get started!
Eligible Property Types
• 1-unit site-built homes
• Planned unit development (PUD)
• Modular home (constructed in sections off-site, but when installed at the site takes on the characteristics of a site-built home)
• Site condominium (detached), must be fee simple interest for land and dwelling
• Rural Properties
• Tear-downs & major renovation
• Eligible with 12 month construction period only
Ineligible Property Types
• Manufactured homes
• 2-4 unit properties
• Properties where construction has already begun
• Lots in excess of 10 acres
• Log homes