CONSTRUCTION TO PERMANENT
Do you need financing for a newly constructed home? AnnieMac Home Mortgage's Construction-to-Permanent loan program makes it quick and easy. We'll save you delays, hassles and expense on the financing end. One hurdle if you're trying to get a home built is the fact that you can't use a conventional, long-term mortgage to buy an empty lot or an incomplete home. And the financial burden of paying for an entire home with a short-term loan is more than most people can deal with.
How do you get around that?
You could obtain an initial loan to fund the construction, and then get a long-term mortgage to pay off the remainder of the project once the home is built. But when you do it that way, you end up paying two sets of closing costs. You also waste time and effort shopping for two separate loans. With construction-to-permanent financing, that second loan is unnecessary. The construction loan and the long-term mortgage are all part of the same transaction. One closing will take you all the way from construction, through moving day, through your new life as owner and occupant of a special home built to meet your individual needs. Another advantage to a single loan closing to cover both construction and long-term financing? Security. Picture this. You have your heart set on a home that's been built to your specifications. You get approved for the initial loan that funds the construction. So far, so good. But something happens over the next six months while construction is taking place. Maybe you get laid off from your job. Maybe your salary gets cut. Then when it comes time to get the long-term mortgage, suddenly you don't qualify. A construction-to-permanent loan spares you that uncertainty. The initial closing locks in a fixed rate, and the loan converts to permanent financing at the end of construction with no additional fees.
More security means more confidence, which means more willingness to get off the fence and commit to a purchase. Construction-to-permanent also has the following advantages:
- Covers a construction period of six to 12 months.
- Lot equity can be credited toward down payment.
- Points are not required, but they may apply if the borrower has a lower credit score or wants a lower rate. We have access to federally backed programs including one from the Federal Housing Administration available to borrowers who might have problems qualifying for a conventional loan; and one from the U.S. Department of Veterans Affairs that requires no down payment and no mortgage insurance for current or former members of the armed forces.
HOW DOES IT WORK?
Once you have a lot picked out, an appraiser will come up with an approximate value for the home to be built. Since the home doesn't exist yet, obviously this will have to be an estimate. The appraiser will go by recent sales of similar properties in the area as a guide. You can choose the builder. But to protect your interests and ours, AnnieMac will have to subject the builder to a review including references and public records. You'll go through the process of getting the loan, which will include both the construction loan and the long-term mortgage, saving you money and effort. The rates are locked at that point, meaning a rise in rates won't affect your payments. The loan will have a construction term of up to nine months, depending on the type of financing. Once you've closed on your loan, construction can begin. As construction proceeds, we'll release funds to the builder for each phase of the project. During this period of the loan, you pay only the interest on the principal - unless it's a Veteran's Administration loan, in which case the builder will pay that interest. (See our section on VA loans for more information.) Once the construction is complete, the loan converts to a conventional mortgage and you make regular payments that reduce the total loan amount. Don't worry if it seems complicated. A member of our team will be available to advise and assist you through the entire process. If you'd like to learn more about this innovative program and what it can do for you, feel free to contact me any time.