Me Myself N My Mortgage Theories

The mortgage industry not only offers loan program for already developed properties but also gives you the chance to build the home of your choice. A popular option for building a new home is the construction-to-permanent financing.Its a financing option in which the lender provides cash for constructing your home and when you are about to occupy it, the loan is converted to a permanent mortgage.

Advantage:

There is only one application and one closing, so you don’t need paying twice on the construction as well as permanent financing. Also, the cost of the land is included within the loan, so there is no need of a separate land loan.

Disadvantage:

A big drawback with this financing method is that the rate lock for the permanent financing is decided upon much before the loan is converted to the permanent program. And, the longer time you take to occupy the property, the more expensive is the rate lock. The rate lock may expire before you convert into permanent financing. In that case, if you want to avoid risk, you should choose the lock-and-float option in order to avail lower rates if the market rates are reduced while your house is being built.

It is better to check out with the lender on the various terms and conditions on this loan program and also about the rate lock options on offer. This will help you choose a suitable lender who can provide you with an option to build your dream home.