What Are Different Types Of Construction Loans?

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Source : http://hhowtogetaloans.blogspot.com/2010/0...t-types-of.html

If a borrower is to build us a house to renovate, or possibly an already established it is generally required to obtain a construction loan. This person can provide for a loan to complete a household project they have worked or are starting to borrowers even a good amount of cash building their dream home.

Typically this type of mortgage loan is only intended to only be lent for a short time during the construction period on the property. Many people do not know but there are actually multiple types of construction loans one can look into.

A one-time close loan is probably the most popular type of construction loan. This type of mortgage is when the lending institution allows a certain amount of money to be lent out, and to be paid back in full during the time the home is being constructed. For example, if the borrower estimates that the home should be completed in two years, they will generally then have to make 24 monthly payments for the loan to be paid by the time the project is complete. These loans usually are very short term with a fixed interest rate. The borrower may end up having to pay additional penalty fees if the home is not completed on time according to the loans agreement. After the property is built the lender can then convert this loan into a traditional long term home loan.

A note modification loan is another common type of construction mortgage. Like a one-time close loan this type of mortgage can also become a traditional home mortgage after the home is complete. This type of mortgage typically will start out with a low monthly payment and slowly increase as time goes by. Once the home is completely built the borrower will be able to choose from a fixed rate or variable mortgage. With a variable rate it is important to remember that your payment may increase a significant amount over time. Another type is called a two-time close loan. This loan has a set payment schedule that will pay off the cost of construction when the house is finished. Generally, after the home is completed the borrower can refinance into a new loan with a better rate. Usually this is only applied to expensive building projects.

Many times you will find that lenders will offer a specific type of construction loan based off the what the borrower is pursuing. A lot of people will apply for a manufactured home loan which is typically short term as well because the homes are much less expensive to build. But keep in mind that this loan will also carry other costs that include the moving from a factory to the specific spot the owner wants to build. There are actually many other loans that are specialized for manufactured or log homes as well.

Typically this type of mortgage loan is only intended to only be lent for a short time during the construction period on the property. Many people do not know but there are actually multiple types of construction loans one can look into.A one-time close loan is probably the most popular type of construction loan. This type of mortgage is when the lending institution allows a certain amount of money to be lent out, and to be paid back in full during the time the home is being constructed. For example, if the borrower estimates that the home should be completed in two years, they will generally then have to make 24 monthly payments for the loan to be paid by the time the project is complete. These loans usually are very short term with a fixed interest rate. The borrower may end up having to pay additional penalty fees if the home is not completed on time according to the loans agreement. After the property is built the lender can then convert this loan into a traditional long term home loan.

A note modification loan is another common type of construction mortgage. Like a one-time close loan this type of mortgage can also become a traditional home mortgage after the home is complete. This type of mortgage typically will start out with a low monthly payment and slowly increase as time goes by. Once the home is completely built the borrower will be able to choose from a fixed rate or variable mortgage. With a variable rate it is important to remember that your payment may increase a significant amount over time. Another type is called a two-time close loan. This loan has a set payment schedule that will pay off the cost of construction when the house is finished. Generally, after the home is completed the borrower can refinance into a new loan with a better rate. Usually this is only applied to expensive building projects.Many times you will find that lenders will offer a specific type of construction loan based off the what the borrower is pursuing. A lot of people will apply for a manufactured home loan which is typically short term as well because the homes are much less expensive to build. But keep in mind that this loan will also carry other costs that include the moving from a factory to the specific spot the owner wants to build. There are actually many other loans that are specialized for manufactured or log homes as well.