Construction loans make it possible for you to build your northern Utah dream home.
We all dream of the perfect house, for ourselves and our families, and a construction loan allows you to turn that dream into a reality. At Intercap Lending, we have assembled a portfolio of construction loan products that meets the needs of every customer.
To determine which type of residential construction loan is best for you, consider the different types of loans available and how each one fits with your needs.
One-Time Close Construction Loans
The one-time close (OTC) construction loan was designed for borrowers who prefer to structure their loans so that they cover the building phase of their new home as well as their long-term mortgage.
Using this program, buyers purchase the homesite (lot) and pay their contractor for labor and materials. Upon completion of the home, the loan converts to a regular 15- or 30-year mortgage.
The primary benefits of this program are that the borrower must only qualify for one loan and pay one set of closing costs. Once the construction phase concludes, the homeowner is subject to permanent loan terms (typically FHA or conventional).
Another advantage of this program is that you can lock in your mortgage interest rate at the beginning of the process, protecting you against future rate increases.
During the construction period, the lender releases funds to the builder through a system of progress payments (known as draws), based on the percentage of the work that has been completed. To ensure that the funds are used appropriately, and that the work meets the required standards of quality, the lender will send an inspector to verify the progress prior to releasing any payments to the builder.
Two-Time Close Construction Loans
With a two-time close (TTC) construction loan program, you close first on the financing for the homesite (if necessary) and pays the contractor to build your home.
Depending on the anticipated build time, you may be required to make interest-only payments during the building phase. Once the building phase is complete, you will close on a regular mortgage, using whatever type of loan program you prefer. The proceeds of this loan pay off the construction loan.
The primary advantage to the two-time close approach is that, if interest rates fall during the construction phase, you can take advantage of those lower rates for your permanent loan.
Finding the Right Orem, Utah Construction Loan
Most construction loans allow you to borrow a percentage — typically 60 to 75 percent — of the finished home’s appraised value. However, some programs lend only a percentage of the cost to build. The amount of money required from the borrower depends on the financing program you choose.
If you already own your lot, you can typically use your equity in the homesite as your contribution to the loan.
In Orem, Utah, Intercap Lending offers a variety of programs for financing your dream home’s construction. Contact us today to learn more about the process or to get started on your loan application. We look forward to helping you find the perfect construction loan program.