Building a New Home? Be Prepared
Posted on May 3, 2013
Building your dream home is exciting! However, there are many unknowns, some of which are beyond your control. How long will construction take? Will the builder complete everything according to the plan? What will the final cost be? Securing financing for your construction project is a critical step in the process — and it’s something you can control.
NEW CONSTRUCTION LOANS
Getting financing for new home construction is slightly different than getting a mortgage for an existing home. Here’s what you need to know:
- Interest-only payments are made during the construction period based on funds drawn — with the construction period ranging from six months to a year.
- A draw schedule for the loan is agreed on by the borrower, the contractor and the lender. This ensures funds will be available during each phase of construction.
- If the borrower owns the land, the lot may be considered equity for the construction loan.
- A certificate of occupancy is issued and a final inspection is done on the home at the end of the construction period to ensure that the home meets building codes and has been constructed according to the contract. Once that is done a final disbursement is made that completes the construction process.
At Chemical Bank, your construction loan automatically converts to permanent mortgage financing once construction has completed. With construction-to-permanent financing you enjoy the convenience of one loan, one application and one closing date. In addition, you have the flexibility to choose a mortgage program that fits your long-term needs. Doing so makes it possible to lock in a low, fixed rate for your permanent financing.
To build a happy home with no obstacles along the way, stop by your local Chemical Bank office or call one of our Mortgage Loan Officers at 800.867.9757 to help you explore all of the available financing options for your construction loan needs. Our lending team has fine-tuned our construction lending process to help make you as happy building your home as you will be in it.