If you are planning on building a new home and it will be owner occupied and you will be using a General Contractor to do the building, Construction To Perm Financing is the way to go. These loans go by many names, Construction to Perm, One Close Loans and One Escrow Loans among others. However they are called, getting one of these is the best way to go. If you meet the guidelines they are far, far better than a straight construction loan. You get better rates and better pricing than with a straight construction loan. And, at the end of construction you do not have to go through another loan underwriting process to get your permanent loan put into place. Generally, you need to finish construction which is evidenced by a Certificate of Occupancy and you need to sign some modification documents which convert your loan from an interest only construction loan into a fully amortized permanent loan. In most cases there are no costs associated with doing this. There are no new title charges, escrow fees, loan costs or bank fees. You don’t even need a new appraisal. There is no fire drill to get your new loan put in place. A Construction to Perm loan will save you time, money and headache.
Whether you are planning to build a home in San Diego, San Francisco or anywhere else in California, our Construction to Permanent home loans will help you build your home from the ground up with just one loan. We specialize in construction loans, so we have the experience needed to help you through the process. We are familiar with all of the ins and outs so you can rest assured that we are helping you make informed decisions that will benefit you in the long run.
It’s important to have all of the facts when considering what loan to choose, so let us help educate you and lay out all of your options. Here are just a few things you need to know.
Benefits of a Construction to Permanent Loan:
- Lower Interest Rates: These loans typically have lower interest rates than a construction only loan.
- Lower Loan Fees: These loans tend to have lower loan costs than a construction only loan that needs to be refinanced into a permanent loan. A Construction to Permanent loan requires a one-time qualification process rather than two separate qualifications.
- Security and Peace of Mind: Construction to Permanent loans afford you the security of knowing that at the end of your construction project you will not be under a ‘time’ deadline to get a new permanent loan put in place; or if the market changes and rates rise while you are building, you have access to the same rate for your permanent loan that you enjoyed during your construction period.
- More Favorable Ratios: CTP loans typically have higher Loan to Value (LTV) and higher Loan to Cost ratios than construction only loans.
Limitations of a Construction to Permanent Loan:
- Owner Occupied Required: The project must be owner occupied whether it is a single family residence or a small multi-family development of up to 4 units.
- Must Use a General Contractor: At a minimum, a general contractor’s license must be used. Depending upon the program, you may get by using a licensed general contractor as a Site Supervisor. Most programs will however require that the construction be performed by a General Contractor. Just having a B-1 license will not be sufficient in all cases. Many programs will require that the GC has a history of successfully completing a number of residential projects in the recent past. Please check with us for complete details about Owner Builder requirements.
- Market Rates: While Construction to Permanent programs offer rates that are typically lower than those offered in straight construction loans, the Construction to Permanent rates are generally higher than the current ‘market rates’ for a purchase or refinance loan. Depending on market conditions, some people who get CTP loans will refinance out of them at the conclusion of their construction period.
If you are ready to apply for your construction to permanent loan anywhere in San Diego County, click here to get started and we will schedule a time to discuss your needs.