construct loan

Home construction loan

A home construction loan is a short-term, high-interest product that provides the funds required to build a residential property.

The initial loan term generally lasts the length of your construction project. Since construction loans are on short timetable and they’re dependent on the project’s progress, you need to provide the lender with a construction timeline, detailed plans, and a realistic budget. Depending on the type of construction loan, you might be able to convert the construction loan to a traditional mortgage once the home is built

The construction loan process generally follows below steps.
Step 1 --- The borrower applies for a construction loan, submitting financials, plans and project timelines.
Step 2 --- Once approved, the borrower starts drawing funds in conjunction with each phase of the project. Throughout construction, an appraiser or inspector assesses the build at key intervals to authorize more funds.
Step 3 --- Once construction finishes, the borrower repays the loan, or converts the loan to a permanent mortgage and begins repaying both principal and interest.