One-Time Close Construction Loans In Spokane

What is a Construction Loan?

A construction loan is a short-term loan used to fund the construction of a house or other real estate project. Builders or homebuyers who custom-build their own homes will likely employ it.

These loans can be used to cover expenses such as the purchase of land, the creation of blueprints, the acquisition of permits, and the payment of labor and materials. Furthermore, construction loan monies may be paid directly to the contractor in installments rather than to the borrower.

Following the completion of construction, the borrower can either refinance the construction loan into a permanent mortgage or obtain a new loan to pay off the construction loan. This new loan is referred to as the “end loan” by many people. In other situations, the borrower may only be needed to make interest payments during the construction period, with the balance due to be paid off entirely by the time the project is completed.

There are two varieties of construction loans: construction-only and construction-to-permanent. The Construction-Only Loan is intended to cover only the construction period, typically one year, and is a higher-risk loan. The Construction-To-Permanent Loan is an additional financing option available to custom home contractors. It becomes a permanent mortgage once construction is finished.

Single-Close vs. Two-Time Close Loan

A construction loan is a type of loan used to pay the cost of building or substantially upgrading a property. Construction loans are classified into two types: one-time close (also known as single-close) loans and two-time close (also known as two-close) loans. The primary distinctions between the two types of loans are the loan closing process, interest rates, and the level of risk involved.

• One-Time Close Construction Loan

A one-time close construction loan is a loan arrangement that covers both the construction and permanent finance (mortgage) phases of a new home construction or extensive renovation. A one-time close loan requires the borrower to complete only one application, has only one closing date, and pays only one set of closing expenses. The building phase and the permanent loan parameters are set from the outset, including the construction time, the permanent loan period, and payments for both. The loan’s interest rate is usually determined before construction and remains fixed for the duration of the loan.

• Two-Time Close Construction Loan

A two-time close construction loan consists of two loans: one for the construction phase and another for permanent financing. This requires two application processes, two closing dates, and two sets of closing costs. Typically, the construction phase is financed by a short-term loan or line of credit with an adjustable interest rate. The permanent mortgage is offered with a fixed interest rate.

The key benefit of a one-time close construction loan is its ease of use and security. There is less chance that changes in the borrower’s financial status will influence the borrower’s ability to qualify for the permanent loan, and the interest rate is locked in from the start, protecting against prospective rate rises. A two-time close construction loan, on the other hand, may offer lower rates and greater flexibility. It does, however, need two loan closings, which may result in higher costs and the danger of changing financial conditions or rising interest rates influencing the terms of the permanent loan.

When deciding between a one-time close construction loan and a two-time close construction loan, borrowers should carefully consider their financial situation, risk tolerance, and ability to deal with potential complications or changes during construction.

Types of One-Time Close Construction Loans

There are three major types of one-time close construction loans. The advantages of these loans include lower interest rates during the construction phase, fixed interest rates for the permanent mortgage, and a single closing procedure that reduces closing costs. However, they have disadvantages, such as stricter eligibility requirements and increased documentation.

• FHA One-Time Close Construction Loan

This loan type is available for one-unit, stick-built primary residences, new manufactured housing for primary residences (excluding single-wide mobile homes), and modular homes. It enables buyers to finance the construction, lot purchase (if required), and permanent loan in one mortgage. The program provides a single loan with a single closing date and a set of parameters governing the loan’s progression during the construction phase and beyond.

• VA One-Time Close Construction Loan

These loans are comparable to FHA One-Time Close Construction Loans but are restricted to eligible veterans, active-duty service members, and surviving spouses. Like FHA One-Time Close Loans, VA One-Time Close Loans provide financing for construction, lot purchase, and permanent loan in a single mortgage.

• Conventional One-Time Close Construction Loan

The government does not insure these loans and may be conforming or jumbo loans. They offer financing for the construction of both primary and secondary residences. The loan converts to a wholly amortized principal and interest payment upon maturity.

Apply for a Spokane One-Time Close Construction Loan

Capital Home Mortgage is an attractive alternative for Spokane home buyers looking for a one-time closing construction financing. We offer a comprehensive loan program created explicitly for manufactured home buyers, making it an excellent choice for people wishing to build their dream house in Spokane. Capital Home Mortgage’s one-time close (OTP) program combines the costs of land and dwelling into a single transaction, eliminating the administrative burden and cost generally associated with numerous loan closings. The program provides 30-year fixed-rate financing with competitive interest rates equivalent to single-family home loans. Capital Home Mortgage’s commitment to flexible funding, faster lending processes, and competitive rates will benefit Spokane home purchasers.

Call (253) 528-4417 today to speak with one of our Spokane Construction Loan Specialists.