‘Understanding construction loans,’ a summary from Marc Coons, Paso Robles mortgage consultant

Paso Robles mortgage lender

A home construction loan provides funds for building or renovating a home. They work by first submitting the construction plans, costs and projected timelines for certain stages of the project. When approved, the project starts and funds are issued in stages that are agreed upon when the loan is finalized. When construction is done, a construction loan can usually be converted to a regular mortgage. During construction, the loan payments are usually just interest payments but when the loan converts, regular payments begin.

That’s the simple explanation. Marc Coons, the Paso Robles Mortgage consultant has summarized what there is to know about construction loans to help make them a little easier to understand:

  • A construction loan is like any other home loan in that you need to qualify first.
  • A construction loan can cover the cost of the land, contractor labor, materials and permits.

The different types of construction loans are:

  • The most well-known type of construction loan is the loan which becomes a permanent mortgage when the house is completed. At that time, regular mortgage payments begin with what is known as an “end loan.”
  • The construction-only loan only funds the project until the home is built. At that time, the loan is due in full.
  • A renovation loan for remodeling but there are other types of financing that might be the wiser choice than this type of loan. Home equity loans, a line of credit, refinancing, or even a second mortgage might be a better choice. The Paso Robles Mortgage consultant is the person to discuss your best options for financing a remodel. 
  • Owner/builder loans when the borrower is building the home. These loans are usually not granted to homeowners who are not construction professionals.

Construction loans might be a little more difficult to get than a mortgage because there are so many factors that are involved in building a home from the ground up:

  • Do you own the land or will the loan also cover the cost of the land?
  • How complex are the local building permit and inspection processes? Delays in permit approvals can delay the construction.
  • Can you satisfy the lender that you can repay the loan? Repossessing a completed home is a lengthy and expensive process for lenders. Repossession of a partially built home is even more complex and it’s not as easy for the lender to recover the money.
  • What kind of guarantees can the contractor make that the construction will be completed on time?
  • Are there any potential issues in the geological report and how can those be resolved?
  • Are there other options for funding the project?

Before shopping for a construction loan, make an appointment to discuss your goals with Marc Coons. The Paso Robles mortgage consultant has been serving the home loan needs of local communities since 2005. Backed by CrossCounty mortgage and with access to hundreds of lenders, Marc can be a one-stop-shopping source for any kind of home loan, including a construction loan. Services include:

  • Mortgage loans and financing.
  • Conventional, Jumbo, FHA, USDA, VA and 203(k).
  • Construction loans.
  • Home purchase or refinancing.
  • Equity loans and HELOC (lines of credit).

Make an appointment for:

  • Answers your questions.
  • Thorough understanding of your circumstances.
  • Help to qualify.
  • Help with streamlining the paperwork and mortgage application.

Call today!