Why Construction Loans Are Different
A normal mortgage finances an existing home.
Construction financing funds a home that does not yet exist.
The lender therefore evaluates the borrower, land, plans, budget, builder, appraised completed value and construction schedule.
Draws
Money is generally released in stages as construction progresses.
For example: foundation, framing, mechanical systems, finishes and completion. Actual draw procedures vary.
Cost Overruns
This is one of the biggest risks.
If the project budget is $700,000 and final cost becomes $825,000, where does the extra $125,000 come from?
Build contingency into planning.
One-Time vs. Multiple Closing Structures
Products vary. Some construction-to-permanent loans are structured around one closing; others involve separate financing stages.
Compare carefully.
Lisa's Role
Lisa can help with land acquisition, comparable finished homes, location, resale considerations and property search.
Construction financing belongs with an experienced lender.
