Simplify the Path to Your New Home with a One-Time Close Loan
Building your dream home from the ground up can be an exciting endeavor. But it also brings with it several challenges. In addition to the many construction decisions you will be facing, you’ll likely have multiple options for financing the project and the mortgage that follows. While it’s not unusual to tackle these financial requirements separately, there is an option that simplifies the funding with a simultaneous approach. Often referred to as a one-time close construction loan or construction-to-permanent financing, these loans can provide unique advantages to the alternative.
Limit Closing Costs
One of the most obvious benefits of utilizing a one-time close loan to build your next home is right there in its name. It allows you to avoid closing on a construction loan, and paying the accompanying closing costs, then closing on a mortgage loan only to pay those costs yet again.
While it’s not the only factor worth considering when deciding which route to take, you can be confident that a single closing, rather than two, will result in reduced closing costs. Since interest rates may be lower for an initial construction loan versus the one-time close loan, you’ll want to weigh the overall impact of each carefully. However, the differences don’t end with closing costs.
Another advantage that construction-to-permanent financing provides is some control over the riskier aspects of splitting the transaction across two loans. A one-time close loan allows borrowers to avoid rising interest rates by locking in their mortgage interest rate early in the process rather than waiting until the home nears completion, which could be a full year later.
Similarly, without a one-time close loan, borrowers will need to qualify for a mortgage two or sometimes three times during the process – during the initial construction phase and upon completion. An unexpected job loss, temporary change in credit score, or variances in the home appraisal process could require additional cash to get the deal done, or even derail it completely.
Faced with the complications and stress that are inherent in new construction, a one-time close loan offers a simplified funding mechanism that many buyers will welcome. Beyond limiting the uncertainty of interest rates or changing circumstances, these loans allow a single application process early in the timeline. Once completed and approved, you will be able to turn your attention fully to the construction of your home. You won’t have to complete paperwork and provide documentation once again, prior to moving in.
If you think a one-time close loan might be the best route for your new home construction project, call Open Mortgage to speak with a knowledgeable origination specialist or explore our website for more information.