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Financing Basics

Financing the construction of a new home is more challenging than obtaining financing for a conventional home purchase. Particularly in the current financing market, begin to search for financing early. Work with a mortgage broker that specializes in, or is at least familiar with, the unique loan products that cover home construction lending.

Convertible loans

These loans cover your construction, and then convert into a permanent mortgage without a second closing. This is a special product called a CTP, or construction to permanent, loan designed particularly for the needs of individuals building homes. As you build your home, it serves as a credit line, from which you write checks for your lot and construction costs. You will typically make interest-only payments during the construction phase.

Separate loans

Some individuals find that two separate loans work better for their situation. Explore your options with a mortgage professional to ensure you are getting the best possible product for you specific needs.

Posted in: Buyers Guide