What is a Construction Loan? |
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Answer:
A construction loan is a loan that Some of the main components of a construction loan include “soft costs” which consist of the architectural plans, engineering, and the cost of fees which may vary due to permit requirements. “Hard costs” are considered the actual cost of the construction. Other costs factored into a construction loan include “reserves” which consist of interest reserve and contingency reserve, as well as any costs to pay off an existing lot, if necessary. In addition, fees included in a traditional loan such as closing costs, lender fees, and inspection fees are also included in a construction loan. It is possible to obtain “construction to permanent loan” financing. With this type of financing, closing costs are paid one time on the loan and then the loan becomes a traditional mortgage loan after the construction is final and a certificate of occupancy is acquired. However, before locking into any type of construction loan it is best to check out all your options -- including the possibility of locking in an attractive interest rate at the beginning of construction. Consult with a professional lender or mortgage broker prior to obtaining your construction loan to make sure there will be no hidden costs when it comes to the final closing. Trackback(0)
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