LeaderOne Financial Corporation

Call (800) 270-3416

To speak with a Loan Officer

Construction Loans

Build Your Dream Home

Share This Page:

Related Pages

CONSTRUCTION Loan Overview

Construction loans are a popular financing option for individuals and companies looking to build a new property or renovate an existing one. They are specifically designed to provide funding for the construction process and can be used to cover the costs of materials, labor, and other expenses. In this article, we will provide a comprehensive guide to Construction Loans, including the process, requirements, and frequently asked questions.

Are you a Veteran? Click her for VA construction loan lenders.

What is a Construction Loan?

A construction loan is a short-term loan that provides funding for the construction of a new property or major renovations to an existing property. The loan amount is based on the estimated value of the completed property, and the funds are typically dispersed in increments as construction progresses.

How Do Construction Loans Work?

Construction loans work differently than traditional mortgages. Instead of receiving a lump sum payment upfront, borrowers receive funds in installments as the construction progresses. These funds are known as draws and are based on the completion of specific stages of the construction process.

During the construction phase, borrowers typically make interest-only payments on the amount that has been drawn. Once construction is complete, the loan is typically converted into a traditional mortgage, and the borrower begins making principal and interest payments.

Types of Construction Loans

There are several types of construction loans, including:

Construction to Permanent Loan

A construction-to-permanent loan is a type of loan that combines the construction phase and the mortgage phase into a single loan. This type of loan is popular because it eliminates the need for borrowers to apply for two separate loans and provides more certainty in terms of the final mortgage payment.

Stand-Alone Construction Loan

A stand-alone construction loan is a short-term loan that is used to finance the construction of a new property or significant renovations to an existing property. Once construction is complete, the borrower must apply for a separate mortgage to pay off the construction loan.

Renovation Loan

A renovation loan is a type of construction loan that is used to finance major renovations to an existing property. This type of loan is beneficial for homeowners who want to make significant upgrades to their home but do not have the cash on hand to pay for them.

Construction Loan faq's

Construction loans work differently than traditional mortgages. Instead of receiving a lump sum payment upfront, borrowers receive funds in installments as the construction progresses. These funds are known as draws and are based on the completion of specific stages of the construction process.

During the construction phase, borrowers typically make interest-only payments on the amount that has been drawn. Once construction is complete, the loan is typically converted into a traditional mortgage, and the borrower begins making principal and interest payments.

There are several types of construction loans, including:

Construction-to-Permanent Loan

A construction-to-permanent loan is a type of loan that combines the construction phase and the mortgage phase into a single loan. This type of loan is popular because it eliminates the need for borrowers to apply for two separate loans and provides more certainty in terms of the final mortgage payment.

Stand-Alone Construction Loan

A stand-alone construction loan is a short-term loan that is used to finance the construction of a new property or significant renovations to an existing property. Once construction is complete, the borrower must apply for a separate mortgage to pay off the construction loan.

Renovation Loan

A renovation loan is a type of construction loan that is used to finance major renovations to an existing property. This type of loan is beneficial for homeowners who want to make significant upgrades to their home but do not have the cash on hand to pay for them.

There are several benefits of construction loans, including:

Flexible Payment Options

Construction loans offer flexible payment options that are based on the construction progress. This means that borrowers only pay interest on the funds that have been drawn, which can help reduce overall loan costs.

Lower Interest Rates

Construction loans typically have lower interest rates than traditional mortgages, which can result in significant savings over the life of the loan.

Customizable Options

Construction loans offer customizable options that can be tailored to the borrower’s specific needs. This includes loan terms, payment options, and more.

To qualify for a construction loan, borrowers typically need to have a strong credit score, a down payment of at least 20%, and a detailed construction plan that outlines the project’s scope, budget, and timeline.  Call us now at (855) 971-1050 to learn more,

The specific documents required may vary depending on the lender and the borrower’s individual circumstances. Call us today at (855) 957-1050 to learn more about doc

Conclusion

In conclusion, construction loans can be an excellent option for those looking to build their dream home or make significant renovations to their existing property. They offer flexible payment options, lower interest rates, and customizable options that can be tailored to the borrower’s specific needs. If you’re considering a construction loan, Call us now at (855) 971-1050 to learn more.

READY TO APPLY FOR A CONSTRUCTION LOAN?