If you’re interested in purchasing a home in Columbus or nearby Ohio, you’ll need to learn about the different types of construction loans. One-time close construction loans are a popular option among many of our borrowers because they have fewer fees and paperwork to deal with than stand-alone construction loans. Lenders provide funding for the build during the construction phase, then converts the loan balance into a regular mortgage. These one-time close construction loans, also known as construction-to-permanent mortgages, require borrowers go through just one approval and closing process, which saves money and time rather than closing a construction loan then a separate mortgage when move-in time arrives. If you’re interested in building a home in Columbus, Dublin, Powell, Cleveland, or nearby Ohio, contact First Financial Bank – Bill Lavelle to further discuss your options.
Construction to Permanent Mortgage
With a typical construction-to-permanent loan, you’ll make interest-only payments during the construction phase. Most of the time, this rate will vary during the length of construction based on if the prime rate increases or decreases. The prime rate is set by the Federal Reserve as a benchmark for adjustable-rate mortgages (ARMs).
Once construction finishes on your new home or investment property, your lender will convert your construction mortgage into a standard mortgage. Your permanent mortgage, like any most conventional non-construction mortgage, can be underwritten to meet your unique needs. You can choose terms from 5-30 years, with either fixed or adjustable rates. You’ll discuss these terms before construction starts on your home, and your lender can lock in rates at that time if you’d prefer.
Preparing for Other Costs
For most one-time close construction loans, you should have at least 20% of the expected final value of the home as a down payment. You should also have savings to cover unexpected costs during construction. Cost overruns occur often during this phase of a project, as borrowers make changes or adjustments that increase costs during construction.
To determine how much you can receive for construction costs, you’ll need to work with an experienced contractor who can carefully plan out – and document – the different stages of construction and their cost. You will also work with appraisers who estimate the post-construction value of your home, which is important during the transition from construction to permanent mortgage. Your lender will speak with your contractor and appraisers closely to ensure the process goes smoothly.
Build the Home of Your Dreams with a Construction-to-Permanent Loan
If you want to buy property and build a home in Columbus, Dublin, Powell, Cleveland, or nearby Ohio, First Financial bank – Bill Lavelle is your local mortgage partner. Our skilled agents work with several top national lenders, who have the lending power you need, while we offer one-on-one attention. Contact us to learn more about one-time close construction loans today.