Construction Loans

Your MACU mortgage specialist will break down the two types of construction loans that are available: one-time and two-step.  Based on your specific needs, your MACU mortgage specialist will help you understand the terms of each and will help you make the best financing decision.

One-Time Construction Loan

The same lender is used for both construction and mortgage meaning that paperwork only needs to be filled out once and that there is only one set of closing costs. With a one-time construction loan, after the home is complete, the loan becomes a mortgage. One-time loans are ideal for buyers who:

• Know the amount of time the project will take to be complete (most likely, these buyers will be using an experienced contractor and are basing their home’s construction off of a template)
• Have firm building plans that they do not intend to change

Two-Step Construction Loan

The mortgage and construction loan are divided with a two-step loan, so the mortgage on the house is not closed on until it is built, which provides for the possibility of closing on a lower interest rate. The buyer does have to re-qualify for the mortgage once building is complete. Additionally, with a two-step loan, though only interest is due during building, the entire principle is due at the end of the loan term. Two step loans are ideal for buyers who:

• Are custom-building a home
• Do not have a locked-in time frame for project completion or who may want to make modifications as the work proceeds
• Are functioning as an owner-builder
• Want the flexibility of being able to extend the loan if need be

Once you know the type of loan that is best for you, your mortgage specialist can help you determine other factors like the length of the construction terms as well as the length of the mortgage period.

Building a new home is very exciting–it allows you to tailor your future dwelling to suit your specific needs. An owner-builder is a property owner who also serves as the general contractor on the construction of the home. An owner-builder has much more involvement in the construction of the home, overseeing the project to completion. An owner-builder must demonstrate that they are capable and qualified to serve as the project manager. This saves greatly on the cost of building the home; so if you qualify, the owner-builder option may be right for you.
 

Considerations for an Owner-Builder Loan

When considering building a new home, there are several things to consider. The owner-builder construction option brings additional decisions to be made and managed. Here are some things to consider that will help you make decisions once you are ready to finance:

• Are you building a custom home, or are you using a builder’s template?
• Are your construction plans firm or are they subject to change (for example, is there a chance you might decide to make cosmetic upgrades once the work is underway)?
• Who will be completing and overseeing the project: you as the owner-builder or a hired contractor?

Meet With a Mortgage Specialist to Get Started

Constructing a new home is both challenging and enthralling. To determine if building your own home is the right option for you, or to get the process started, schedule a meeting with one of our mortgage specialists today. Fill out a contact form online below, visit your nearest Mountain America branch, or call 1-800-277-7703.