Are you planning to build your own, custom dream home? Do you want to understand all the ins and outs of construction loans and closing costs? This week’s blog post is just for you. Ransom Kelly at Assurance Financial is here to share some pros and cons of construction loans for one and two-time closings. Both types of financing can be tailored to your unique needs. If you are working to build a special new home in Birmingham Alabama, then read more about construction loans and give us a call.
One-time Close Construction Loans
Commonly known as a construction-to-permanent loan, a one-time close construction loan is an efficient way to secure financing for your new home. You will only need to close a loan once with this type of loan, since it converts from a construction loan into a permanent mortgage once the building project is complete. This may be the best way to streamline a deal on your new home construction project.
With a one-time close construction loan, you can secure a fixed-rate at the start, preserving the low interest payments for a long period. You can also arrange to make interest-only payments while the home is under construction. If you have a solid budget and strong grasp of your home construction costs, then this loan may be right for you. You will only need to qualify once for this type of financing, as well.
Two-time Close Construction Loans
As the name implies, two-time construction loan financing for new home construction is divided into two loans. The first loan is for short-term construction costs. The second loan is for a longer-term mortgage. This means you will have to get approval for two loans and pay closing fees twice. However, this also leaves room for you to secure better interest rates as you go. In addition, if your costs for construction are higher than expected, you can get additional financing with the second mortgage.
When handling a two-time construction loan, many people have reported that they get lower interest rates with the permanent mortgage. The home that is built with the construction loan can serve as collateral. A lender may find that their risk is lower, and offer you a better financing deal. If you are uncertain about your home construction costs, then this loan arrangement may be ideal. You may also use the second loan to pay off the construction loan.
When it comes to loans, it is important to research carefully and work with a realtor you can trust. Ransom Kelly at Assurance Financial would love to discuss your construction loan needs in the Birmingham Alabama area—contact our offices today!