Finance

A construction loan is a short-term loan designed to finance the building of a property, whether residential or commercial. Funds are disbursed in stages, known as “draws,” according to a predetermined schedule tied to the construction progress.

Alternatively, a construction-to-permanent loan (C2P) streamlines the process by combining construction and permanent financing into a single loan. This eliminates the need for two separate loans—one for land and construction and another for the completed property—offering a more efficient and seamless solution.

Key Features of Construction-to-Permanent Loans

 • Appraisal and Processing:
The proposed home is appraised based on its plans and specifications. The loan application is processed like a standard mortgage.

 • One-Time Closing:
At closing, the borrower pays any required down payment and closing costs. Funds are disbursed to cover the lot purchase (if applicable) and initial construction expenses.

 • Construction Period:
During construction (typically 6–12 months), funds are released based on a pre-approved draw schedule. The borrower pays interest-only on the disbursed funds during this time.

 • Transition to Permanent Loan:
Once construction is complete, the loan automatically transitions to a permanent mortgage. The borrower begins making regular payments according to the agreed terms, without needing to reapply for a separate mortgage

This streamlined process saves time, reduces paperwork, and provides peace of mind by locking in the loan’s terms upfront. Whether you’re building your dream home or starting a new investment, a C2P loan offers convenience and financial clarity.

FHA loans are mortgage loans insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD). These loans are designed to make homeownership more accessible, particularly for first-time homebuyers and those with less-than-perfect credit. FHA loans typically require lower down payments and have more flexible qualification requirements compared to conventional loans. They are popular among buyers who may not qualify for conventional financing due to lower credit scores or smaller down payment amounts.

Conventional loans for residential properties are mortgage loans that are not insured or guaranteed by the government, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). These loans typically require higher credit scores and larger down payments compared to government-backed loans. They offer competitive interest rates and are suitable for borrowers who have good credit and stable financial situations.

VA loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs (VA) and are available to eligible veterans, active-duty service members, and some surviving spouses. These loans are designed to help veterans and their families purchase or refinance homes with favorable terms and conditions.
 
Qualification criteria for VA loans typically include:
 
Eligibility: You must be a veteran, active-duty service member, National Guard member, reservist, or eligible surviving spouse.
 
Certificate of Eligibility (COE): You need to obtain a COE from the VA to prove your eligibility for the loan.
 
Credit Score: While there's no set minimum credit score requirement, lenders typically look for borrowers with good credit.
 
Income: You need to have a stable income that is sufficient to cover your mortgage payments and other financial obligations.
 
Debt-to-Income Ratio (DTI): Lenders consider your DTI ratio, which compares your monthly debt payments to your gross monthly income, to ensure you can afford the loan.

Property Requirements: The property being purchased must meet certain standards set by the VA.
 
VA Funding Fee: There is a one-time funding fee that varies based on factors such as your military service, down payment amount, and whether it's your first VA loan or a subsequent one.
 
Meeting these criteria can qualify you for a VA loan, which offers benefits such as no down payment requirement (in most cases), competitive interest rates, and the absence of private mortgage insurance (PMI). Ask a Real Estate Agent about consulting with a qualified mortgage lender or the Department of Veteran Affairs for the most up-to-date and specific information based on individual circumstances. 

A USDA loan is a mortgage loan program offered by the United States Department of Agriculture (USDA) to help people in rural and suburban areas buy homes with little to no down payment

To qualify for a USDA loan, both the property and the borrower must meet certain criteria:
 
Property Eligibility: The property must be located in an eligible rural or suburban area as defined by the USDA. These areas are typically outside of major metropolitan areas.
 
Borrower Eligibility: The borrower must meet income eligibility requirements, which vary depending on the location of the property, the size of the household, and other factors. Generally, borrowers should have a steady income that falls within the USDA's income limits for their area.
 
Occupancy: The property must be used as the borrower's primary residence.
 
USDA loans are popular because they offer low or no down payment options, competitive interest rates, and flexible credit requirements. They are especially beneficial for borrowers in rural or suburban areas who may not qualify for conventional financing.

Understand the ins and outs of jumbo loans, which are designed for financing higher-priced properties that exceed conventional loan limits. Because they're for larger amounts, jumbo loans often have stricter rules, like needing a higher credit score and a bigger down payment. They're usually used for fancy or luxury homes.

Adjustable Rate Mortgages

Interest rates can change periodically throughout the life of the loan, typically after an initial fixed-rate period. It is very important to ask your lender and get a deep understanding of this type of loan as it can significantly affect the borrower's monthly mortgage payments; which can fluctuate over time depending on market conditions.

Common in various financial products, including mortgages, personal loans, and business loans.

Usually has a shorter term, often around 5-7 years, with the remaining balance due in full at the end of the term. This type of loan has a large, lump-sum payment ("the "Balloon Payment") due at the end of the loan term.