Like the man says, a’blueprint is not a house – so conventional home mortgages don’t apply to construction projects. However, ‘most blueprints become houses ‘- so loans that cover construction, then convert to permanent mortgages or ‘construction perm’ loans are fairly common. The construction loan phase is frequently a variable-rate loan, with scheduled loan ‘draws’ to match construction stages. Upon completion – usually a certificate of occupancy – commonly called a ‘CO’ – ‘the construction loan is converted to a permanent mortgage. The advantage of construction perm loans is that you only need ONE application and ONE closing. Compare interest-rate trends to your construction schedule (and assume construction delays) to evaluate if a rate-lock agreement on the permanent mortgage stage makes sense. And weigh your construction-loan terms and their short-term cost against your mortgage rate, and its probable long-term costs. Compare lenders to get the best ‘construction perm’ package for your situation.
