HOW DOES NEW HOME CONSTRUCTION FINANCING WORK?
A construction loan is unique financing that allows home owners the opportunity to finance the construction of a home, including if you own the land/home or if you are looking to acquire property.
Unlike a traditional mortgage, construction financing works in two parts, the construction and the permanent phases. The construction phase is sometimes called a “draw” and during this period, funds are advanced in order to pay for the construction of a new home, and the owner will make interest only payments.
Upon completion of the home the permanent loan will kick in where the construction loan modifies to a permanent mortgage, the phase that most are familiar with. This type of financing is very common in the build of custom homes as it allows homeowners to work with builders in financing their project.
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