March 5, 2020
Whether you are a custom home builder or a future homeowner who intends to build a home for yourself, understanding your financing options is an important step in the process. When you are building a home on a piece of land, a normal mortgage loan won’t cut it, but there are some special financing options available for you.
Construction loans are a great solution for builders, but many people don’t have a firm understanding of what they are or how they work. Let’s take a look at construction loans and how they can be useful for builders.
There are actually two types of construction loans available to builders. The first type of construction loan is a construction-to-permanent loan. These loans are most helpful for builders who also intend to live in the home. Whether it is a homebuyer who is using a custom builder or a homebuyer who plans to do the work themself, these loans cover the cost of the land, permits, materials, work, and then the mortgage once the home is completed. While this is really two loans, one for the building and one for the mortgage once the home is built, it functions as one loan to simplify things for the buyer/builder.
The second type of construction loan available is a stand-alone construction loan. These loans are best for builders who plan to purchase land and build a home to then turn around and sell it for a profit. These loans are much shorter, and generally have a limit on them that is under a year. Others who would benefit from this type of loan and those who want to use a government-backed loan for their mortgage, like FHA or VA loans, as many lenders don’t offer these as part of a construction to permanent loan.
Obtaining a Construction Loan
Working with a lender who specializes in these types of loans is essential in having a seamless transaction. When you are purchasing land and need to break ground on the home, working with someone knowledgeable and fast is important. Time is money when it comes to building, and working with someone who specializes in construction loans will save you time and money in the long run.
At Maryland Private Mortgage, we specialize in hard money and construction loans in MD. We are experts in our field and we’d be happy to discuss all of your options with you and help you find the best loan for your situation. Give us a call today to get started!
The Maryland Private Mortgage Lending Team