Home Construction Financing
Home construction financing for a new property can be secured in one of three ways: the builder finances the construction and after completion the buyer secures a permanent mortgage or the buyer gets a construction loan and after completion gets a permanent mortgage loan, or thirdly, the buyer gets a single loan covering both the constructions phase and the after completion long term residency of the builder/buyer. Each of these approaches has its own set of advantages and disadvantages.
With all of the things can go wrong with sub-contractors and the difficulties of getting permits and other paperwork completed, anyone taking on the task of being their own contractor is flying in the dark without instruments when home construction financing is not understood.
Because so much can go wrong, many of those wishing to build a new residence choose a builder who will take care of the entire home constructing financing themselves. Of course, in this case will add some cost to the final home mortgage lending agreement the buyers must secure, however the headaches are much less.
Perhaps someone chooses to have a construction loan for the period of building and then a permanent loan from another lender which pays off the first loan. This means that the buyer will have to pay two sets of closing costs which could be very expensive.