Construction To Permanent Loans
February 8, 2013

Our market has certainly seen strong improvement in the past few months. As such, we are seeing a large increase in the amount of new homes being built in the area. Subdivisions that had been sitting almost dormant for 24-48 months have seen a resurgence of new construction in part due to the reasonable cost of lots and an increase of lending by financial institutions. The days of multiple speculative homes is not back by any means, but a builder who has a product in demand and can provide to a bank a viable sales contract is finding money more readily available. One lending option is called Construction to Permanent or CP, for short.

A CP loan can be done as a one-time closing, where all funds are disbursed on draws, and when the home is complete, the note documents are modified to set the terms of the permanent loan. In this scenario, a borrower may realize some savings in the costs of construction and in closing costs compared to a two closing scenario. This program is available when the borrower already owns the lot or when a lot is being purchased in conjunction with the transaction.

The most popular CP loans are done as conventional financing and have loan to value limitations of 80%. When an eligible veteran is looking to build a home, we do offer VA CP loans which may allow for up to 100% financing. This program is gaining popularity in our market with buyers and builders alike realizing some great benefits. If you are planning to build your next home, consider asking about the advantages of a Construction to Permanent loan. We would love to help you become knowledgeable in this process and determine if this is right for you!

Posted by Pam Woodall

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