Construction To Permanent Loans

The FHA One-Time Close (OTC) loan is a product that allows borrowers to combine financing for a lot purchase, construction and permanent mortgage into one.

Loans that combine construction and permanent financing into a single transaction are eligible for delivery to Fannie Mae only after the construction is completed. The construction loan period for single-closing construction-to-permanent transactions may have no single period of more than 12 months and the total period may not exceed 18 months.

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One-time close construction loans are more commonly referred to as construction-to-permanent loans, because the construction loan is converted to a regular or permanent mortgage once your home is complete. There is only one approval process, and the terms of the final loan are known at the initial closing, before construction begins.

The construction-to-permanent loan is made directly to the borrower, a consumer-direct loan. They receive a monthly statement for the interest payment due for the given month. They have twelve (12) months to build and complete the construction from the date of closing and funding.

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A Conventional Construction-to-Permanent mortgage loan is used to finance the construction of the borrower’s home and permanent mortgage into one transaction with a.

Loans that combine construction and permanent financing into a single transaction are eligible for delivery to Fannie Mae only after the construction is completed.

"These loans offer developers high leverage with a longer term – up to 40 years – and the flexibility they need to complete construction with permanent financing in place." "We are pleased to offer.

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The buyer can get the construction loan for 1 point provided he also takes the permanent loan, or for 2 points while retaining his freedom of action to shop for the best deal on a permanent loan. Which is the better deal depends on how the combination lender prices the permanent loan relative to the competition.

Converting a construction loan to a permanent loan is only necessary if you didn’t take out a construction-to-perm loan, which typically doesn’t require a new loan. If you do have to convert your construction loan to a permanent one, you may have to go through all the same qualifying steps again.