Construction permanent loans
Construction to permanent loans are the loans that have been designed for the borrowers that wish to finance the construction of their homes. This construction is generally carried out by a reputable builder. Loan is also offered for major additions in the home or for making renovations. Construction to permanent loans are generally offered to the borrower directly rather than builder.
There are two phases in these loans. These are construction phase and the permanent phase. In the construction phase, which commensurate with the construction of home, only interest is required to be paid back by the borrower. Interest is charged at fixed or floating rate and is based upon the prime lending rate of the lender.
After the completion of construction, loan enters second phase i.e. permanent phase and becomes a permanent loan. One of biggest benefit of getting the construction to permanent loans is that a person can easily save costs attached with loan. This is because there is only one set of closing costs charged in this loan and borrower is not required to pay costs for construction and permanent phases separately. There are some lenders in United States that offer construction to permanent loans for financing rehabilitation projects also. It should be understood here that if a person is not able to carry the existing mortgage as well as construction to permanent loans, he may be required to sell his current home for building new one. Though construction phase varies from 6-18 months, upon the request of borrower, it may be extended after consultation with the loan consultant and the builder. However, there are certain costs that have to be borne by the borrower.
There are some providers of construction to permanent loans in United States that allow borrowers in paying back principal amount also in the construction phase without charging any penalty. Such lenders are definitely better than others as total amount of permanent loan gets reduced. This results in lower monthly obligation for the borrower. As far as documents for the loan are concerned, these comprise mortgage documentation and copy of construction agreement made between borrower and the builder, copy of payment schedule and builders license. After the completion of construction phase, loan is automatically converted into permanent loan in quick and simple manner. Construction to permanent loans are also offered with rate protection facility. Under this, a person can easily get the maximum interest rate set for entire loan period and interest rate charged cannot be more than rate set. For drawing amount during the construction period, borrower may be required to provide request affidavit, copy of building permit, inspection report, etc. If borrower demands, payment can also be made directly to the builder.
A person should be careful in choosing the interest rate option viz. ARM or adjustable rate mortgage and fixed rate option or FRM. In current times, interest rates have gone very low and thus, it is beneficial if a person opts for fixed interest rate. Care should also be taken with respect to points.
There are certain disadvantages too of construction to permanent loans. For example, there is very less flexibility available regarding interest rates at the end of construction. A borrower cannot make comparison among all the lenders as in case of traditional mortgage and thus, has to pay the rate charged by the lender. In most of cases, interest rates are already locked and even if market interest rates fall, there is little a person can do about it. If he wishes to back out loan, he has to pay forfeiting points. This is the reason why many experts feel that rather than going for construction to permanent loans, a person should go for builder financed construction. In this type of facility, finance for construction is provided by the builder and borrower can find cheapest mortgage loan in traditional manner.
Some sources
Let us discuss some lenders offering construction to permanent loans in United States for understanding various aspects. Sun Trust Banks Inc is one of leading institutions offering construction to permanent loans. There is only one set of documents and closing fees involved. A person can choose from many types of loans. Since builders funds are not tied up, these can be used for other productive avenues. Sun Trust is one of largest financial holding companies in United States and offers services across the state. A person can easily call at 800-786-8787 for getting more information.
Schwab Bank also offers construction to permanent loans in United States. Loan amount is provided for construction, renovation etc. Monthly payments payable are low and a person can select the length of time period for completing the construction of home. Interest rates attached are one of lowest. Minimum and maximum loan amounts are $25000 and $4 million respectively. If a person wishes, he can also get the cost of purchase of land financed. Loans are offered in personalized manner and assistance is provided throughout the loan process. Schwab Bank can be called at 877-535-4021 for getting more information. Construction phase of loan can be extended by making request and paying charges. There is no penalty for repaying loan in the construction phase. Rate protection facility is also available and a person can lock low interest rates for entire loan term.
LFS Home Loans is another source offering construction to permanent loans in United States. A person can easily get all the desired information about these loans through online brochure. Characteristics of construction to permanent loans offered by this source include one time closing fees, interest only payments in construction phase, up front rate locking facility etc. There is one time qualification and permanent loan amount can be paid through fixed rates. Builders are also protected against borrower default. For getting more information, a person can easily call at 866-812-4826. Construction to permanent loans have proved very useful for those people that cannot afford cost of construction. Due to these loans, many people in United States have fulfilled their dream of homeownership. However, a person must make monthly payments in time otherwise he may loose his home.
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