Committed to World Class Service
Community First National Bank - McAllen, TX
Committed to World Class Service

Construction Loans

Construction Loans

What is 'Construction Loan'

A short-term loan used to finance the building of a home. The builder or home buyer takes out a construction loan to cover the costs of the project before obtaining long-term funding. Because they are short term construction loans, they usually have higher interest rates than traditional mortgage loans.

Breaking Down 'Construction Loan'

Construction loans are usually taken out by builders or home buyers who are custom-building their own home. Once construction on your house is completed, you refinance the construction loan into a permanent mortgage by getting a new loan to pay off the construction loan (sometimes called the "end loan").

At a minimum, most lenders require a 15% down payment on a construction loan, and some require as much as 20%. To gain approval for a construction loan, Buyers need to provide the lender with a comprehensive list of construction details. More Importantly, It is essential to ensure your builder is financially stable and reputable to insure that he or she will be able to complete your project.

Construction loans are usually offered by local banks, because local banks are familiar with the housing market in area, and they are generally more comfortable making home construction loans to borrowers in their community.

What is the Permanent Loan (the End Loan)

The Permanent or The End Loan process generally begins when the home is 30 days away from completion.This permanent loan is used to provide you with Long Term Loan options of 30-year, 25-year, 20-year, 15-year, and 10-year Loans with fixed-interest rates and the proceeds will pay off a short-term construction loan that is owed to the local bank and possibly any additional interim financing that might have been provided by the Builder known as a 2nd lien for the Construction Loan.

By definition; The permanent, long-term loan used to pay off a short-term construction loan or other form of interim financing.
Copyright © 2019 CFNB McAllen
Website designed & hosted by Outdoor Resources, LLC