The Sean Zalmanoff Mortgage Team specializes in making the home purchase or, in this case, the construction home loan process, a great experience!
Building a home is an incredible opportunity and a popular option these days. When you design and build your own home, you get precisely what you want – walk-in closets and pantry, a guest bedroom, a finished basement, and a primary suite with an en suite bathroom. Anything that you want that you can’t quite find in an existing home is possible.
Construction financing options and programs are available to help make your dream home a reality. But how does a construction loan work, and what is the process for obtaining one?
Building your own home is exciting but also involves a lot of work. More is involved than materials, land, builders, and the time it takes. You’ll need to meet several requirements to obtain the necessary financing to make your dream become a reality.
Breaking Down the Loan Process
There are a couple of construction loan options. One option is a two-time closing construction loan. The first loan is an interest-only loan and is for the actual construction. It covers the cost of the land, materials, contractor labor, permits, and other associated expenses.
On average, it takes seven months to build a house from start to finish. During this time you’ll pay only interest. This loan works like a line of credit in that it funds a series of draws or installments that cover the costs of the specific building stages. Your interest-only payments are based on these draws and can be made as monthly payments or rolled into the loan itself.
When construction ends, you’ll need to qualify for your final loan. This loan will replace your short-term construction loan. This process generally begins when your builder informs us that you’re 45-60 days away from completion. At this point, we’ll start completing your permanent mortgage.
Other types of construction loans include:
- Construction-only loan – This loan provides the necessary funds to complete the home’s building. Still, the borrower is responsible for paying the loan in full or obtaining a mortgage to secure permanent financing. This is also an interest-only loan.
- Renovation loan – A renovation loan is used if you want to upgrade an existing home rather than build a new one. These come in several forms depending on the amount of money you spend on the project.
- Owner-builder construction loan – These are construction-to-permanent or construction-only loans where the borrower also acts in the capacity of the home builder. However, lenders that approve these loans will only allow it if the borrower is a licensed builder by trade.
Construction Loans St. Louis
At The Sean Z Team, we have streamlined the construction process to make closing your loan as easy as possible. If you have questions, call us today. Our loan advisors are here to help!
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