Construction Loans
Construction Loans
A construction loan is a short-term loan with a high-interest rate issued to finance the construction of a house from the beginning until its completion.
The typical repayment period of a construction loan is between 12 to 18 months. The amount secured under this loan product can be used to purchase the land, cover planning and design costs, purchase construction materials, labor, etc.
Unlike traditional mortgages, where the purchased home is used as collateral, construction loans are stand-alone. Most lenders consider these loans to be riskier; hence the application and approval process can be complicated. Luckily for our clients, we understand this challenge, and we strive to make the loan process fast and convenient. We will listen to your financial needs and then evaluate your architectural plans and financial situation to decide on the loan amount you are eligible for.
Once approved for the construction loan in Raleigh, you will present a draft or design a schedule that tracks the project’s construction stages. You’ll also be required to make interest-only payments throughout the construction stages. Similarly, we will make payments to your contractor through installments as they move from one construction stage to another.
Types of Construction Loans
The construction process varies depending on the type and complexity of the project at hand. Some may be costlier than others, so we will always evaluate the cost and customize our loan products to meet your unique needs. You can also choose construction loans from any of the options below:
Construction-to-Permanent Loans
This type of construction loan provides funds to finance the construction of the house, and once it’s completed, your loan will be converted to a fixed-rate mortgage. Construction-to-permanent loans are suitable for homeowners looking to save on closing costs.
Construction-Only Loan
A construction-only loan provides the money necessary to finance the home’s building until its completion. Here, the borrower is required to either pay the loan in full at maturity (typically 12-18 months) or refinance it to a mortgage. This type of construction loan is suitable for someone who has a lump sum amount at the end of the repayment period. It’s also a great option if you want to pay off the construction loan with the amount from the sale of your other/previous house.
Owner- Builder loan
While other construction loans are issued to contractors, owner-builder loans are given to the owner who demonstrates a capacity to act as a homebuilder. Even so, most lenders won’t allow the borrower to act as their own builder because of the complexity of constructing a house and the experience needed to observe building codes.
Construction Loan Rates in Raleigh
Construction rates vary based on the borrower’s creditworthiness, the loan amount, and the loan terms. Generally, construction rates usually linger at about one percentage point above standard mortgage rates (5%-6%). As noted earlier, the rates are slightly higher because construction loans are not secured by a completed home, unlike mortgages.
Construction Loans Eligibility
To be eligible for a construction loan, you’ll need to have a good credit score, a low debt-to-income ratio, and proof of capacity to repay the loan. Similarly, you’ll be required to make a down payment when you apply for this loan. The amount you pay as a down payment will depend on the lender and the amount you’re trying to borrow. Generally, most lenders will require you to pay between 25-30 percent of the total cost of the building.
Why Work With Us
At GoNoCost, we make your loan application process fast and convenient. Once we have verified your eligibility for the construction loan, we’ll proceed to process your loan so you can begin your construction project as soon as possible.
We do not charge any closing fee, and we’re transparent to the core. Our loan professionals will walk you through the loan application and closing process if you have any questions. Contact us today, and we’d love to help you secure a loan to finance your construction project.
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