Construction Loan

A temporary home-building loan that usually lasts a period of six months to about one year. It is paid off with a long-term mortgage on the completed home.

Before applying for construction loans, borrowers must apply for a residential mortgage and get approval. Funds obtained from a construction loan are usually paid in stages throughout the life of the building project. The lender is actively involved in the construction processes while reviewing finished work periodically. It is linked to the actual final mortgage on the specified property.

Long-term mortgage loans and construction loans on any finished house come together as essentially a package deal- a single loan. The benefits from this “construction/perm” loan include easier application requirements, quick approval and lower and affordable closing costs.