Aurora One-Time Close Construction Loan

A construction loan is often a short-term loan that provides funding to cover the cost of constructing or renovating a property.

Construction loans typically offer higher interest rates than longer-term mortgage loans used to purchase a property. The money borrowed through a construction loan is often provided in a series of advances as the construction continues.

How Does A Construction Loan Work?

Construction loans are obtained by builders or homebuyers who custom-build homes. These are short-term loans, typically lasting only one year. When the house is finished, the borrower can refinance the construction loan into a permanent mortgage or receive a new loan to pay off the construction loan. While the project is still in progress, the borrower may only be obliged to make interest payments. Certain construction loans may require the balance to be paid in full by the end of the project.

If a borrower takes out a construction loan to build a home, the lender may pay the funds directly to the contractor instead of the borrower. The payments may be made in installments as the project advances through its development phases. In addition to financing the construction of new residences, construction loans can be used to fund rehabilitation and restoration projects.

One-Time Close vs. Two-Time Close Construction Loan

A one-time close construction loan and a regular two-time close construction loan have different terms and payment schedules.

• A one-time close construction loan combines the construction loan and the permanent mortgage into a single loan that is closed before the start of construction. A single-close construction loan is another name for this sort of financing. A one-time close construction loan allows the borrower to acquire permanent loan approval and close both the interim and permanent loan transactions simultaneously. The loan terms, such as the length of the construction phase, the period of the permanent loan, and payments for both, are set for the interim loan, but the permanent loan amount is not set because the project still needs to be finished.
• A conventional two-time close construction loan, on the other hand, is a loan that separates the construction loan and the permanent mortgage into two independent loans with separate closing costs. The construction loan is used to finance the house’s costs, and the permanent mortgage is used to repay the construction loan once the house is finished. Each loan’s terms and rates may vary, and the borrower may need to re-qualify for the permanent mortgage at the end of the building phase.

Advantages of a One-Time Close Construction Loan

A one-time close construction loan has several advantages. Here are some of the benefits of a one-time close construction loan:

• Less Fees

Unlike traditional construction loans, which require two closings, one for the construction and one for the permanent mortgage, a one-time close construction loan simply requires one closing. Borrowers can save money on additional closing fees as a result.

• Convenience

Borrowers who wish to save the inconvenience and expense of obtaining two separate loans might choose a one-time closing construction loan. Combining the loans also simplifies the application and underwriting process.

• Time Saving

Borrowers can save substantial time with a one-time close construction loan since they do not need to submit the required paperwork twice or wait for the lender to review them again.

• Qualification

The qualification process for a one-time close construction loan is necessary only before the construction period. It can be advantageous for borrowers because they do not have to re-qualify for the permanent mortgage at the end of the building phase.

• Pre-Approval

Borrowers can obtain pre-approved for the construction and permanent mortgage loans at the start of the process with a one-time close construction loan. This means that even if their credit situation changes after the loan is finalized, their house loan will still be approved.

Apply For A One-Time Close Construction Loan

Building an entirely new house is a major undertaking. Capital Home Mortgage Colorado can assist with a Fort Collins One-Time Close Construction Loan to expedite this process. Our Loan Professionals will work with you and your home builder to ensure everything goes smoothly.

Call (303) 226-1177 to speak with one of our Construction Loan Experts.