Construction Perm Loans

Hi everyone!

Can anyone comment on their experience with construction to perm loans? I own 2 lots in FL, I’m looking to build on them and rent. I’m getting an offer from a Builder who will use equity I’ve gaind in the lot since I bought it (about $30K) as a downpayment, and offer me no payments during the constrution period (12 months). Claims the interest rate will be about 7.75% once the construction loan converts to a regular mortgage loan.

I keep asking the Mortgage Borker what’s the catch, is that interest rate too high for a deal like this? Any comments, suggestions? Thanks!

Well there are some options for you and you can make your choice

You can do a what we call in the business a two time close which is you get a construction loan and then you refi into a long term loan

PRO to this is that you can get better rates because you can choose who you want the long term mortgage company and rate

CONS Two closings thus double closing costs

the second is you can do the construction to perm one time close

PRO one closing thus one set of closing costs and ease of knowing that once costructions done you just shift to the perm loan

CON you have to go with that lender and there rates and there are only a few construction to perm companys so not much to shop rates for

7.75% is not a bad rate I am think that you are going stated NOO home so that is why the rate is what it is you may beable to get a better rate if you go full doc if you can.

Thanks for your feedback! I can tell you’re an expert at this. We are going stated, my credit isn’t that stellar 610 and my finace and mother-in-law are around 720, so I don’t want to hurt the overall rates by adding my not so great credit score.

Is there usually a catch between paying the interest during construction and not making any payments until the house is built?
What are the pros and cons?


Well most of the construction loans are that you do not pay a monthly payment while the house is under construction the lender just adds the interest to the loan and then that is loan amount when you get your perm loan

I guess you could make payments if you want too just to lower the loan amount and it is usually not done though.