Sun. Jan 23rd, 2022

Are you interested in a construction mortgage? There are two types of construction mortgages you can opt for: full construction mortgage and construction loan with a progress draw.

Construction completion mortgage

You should apply for this loan when you buy your home from a qualified builder at a fixed price after the building is completed.

There are two types of this loan:

All-in-one construction loanThis is a simple loan that offers you a single rate for both the construction process and the financing that reaches the end. When you get this loan, you will have to repay it within one year. You should be aware that you have to pay a fine if you exceed the time limit.

Buy more upgrade– This is the one you get when you buy a home that needs good care. The contractor should continue to make any requested improvements and should only accept the building once they are satisfied with the improvements.

Both construction loans have several characteristics:

  • The builder must own the lot where the house is to be built.

  • The builder can request money only when the house is 100% complete.

  • The lender may require an appraisal before, during, and after construction. This is to ensure that the home is worth the mortgaged amount.

  • You must make an initial payment, which can be made in a series of installments.

  • Since the loan is almost similar to a resale property mortgage, the mortgage broker will not require an administrative fee to arrange this type of financing.

Before receiving the loan, you must present a series of documents to the lender. The documents include:

  • Copy of the construction contract signed by you and the contractor

  • House plan and work plans.

  • Site plan showing the legal description and dimension of the property.

  • An appraisal that indicates the final value of the home after construction.

Construction Loan with Progress Raffle

This is ideal when you are planning to build your home with your own general contractor. Apply for funds in three different stages of the loan: when the building is 35-40% finished, 65-70% and 100%. You should be aware that the interest rates on this loan are higher than those of a traditional mortgage.

When applying for the loan it is necessary to present a series of documents that include:

  • Copy of the land contract

  • A resume confirming that you have a good understanding of the construction process.

  • Copy of all subcontracts confirming construction costs.

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