Building on a Budget: Low Down Payment Construction Loan

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Are you tired of searching for your dream home in a low inventory market? With a one-time close construction-to-permanent loan, you have the freedom to design and build your dream home from scratch. This single-close financing option is perfect for buyers in a competitive market, providing flexibility, control, and a low down payment.

what is a construction-to-permanent loan?

A construction-to-permanent loan, often referred to as a one-time close new construction loan, is a type of home mortgage that seamlessly integrates the costs of building a home and the permanent mortgage into a single loan, with no additional closing costs. This single-close financing option streamlines the mortgage process by eliminating the need for multiple loans and simplifies the overall financing experience with one closing transaction.

How Does A construction-to-permanent loan work?

The approval process for a construction-to-permanent loan operates similarly to a traditional mortgage. After applying for the loan and providing the necessary financial documentation, the lender will review your information along with the project contracts, specifications, and timelines.

Unlike conventional loans, the funds for a construction-to-permanent loan are disbursed in stages, known as draws, throughout the construction process. You make interest-only payments on the disbursed amount during construction, and once the construction is complete, the loan converts into a permanent mortgage. At that point, you begin making regular payments that cover both the principal and interest, just like a traditional mortgage.

the benefits of construction-to-permanent loans

A single-close construction loan provides numerous benefits for borrowers considering new home construction. Here are some key advantages:

  • Time and cost savings: With only one closing, borrowers save both time and money by avoiding the need for separate sets of closing costs associated with multiple loans.
  • Customization without compromise: New construction allows you to design and build your dream home, ensuring you don’t have to settle for a pre-existing property that may not meet your preferences.
  • Low down payment options: Gone are the days of needing a hefty 20% down payment for a construction loan. Single-close construction loans offer low down payment options, such as 5% down for conventional loans and even 0% down for VA loans, making new construction more accessible to a wider range of borrowers.
  • Simplified approval process: Rather than obtaining separate approvals for a construction loan and a long-term mortgage loan, borrowers only need to go through one approval, streamlining the overall financing process.
  • Modify down option: Borrowers can modify down to secure a lower interest rate if market conditions change before the completion of their new home.
  • Build-period payments: Conventional borrowers benefit from lower interest-only payments during the construction period, while VA borrowers enjoy the advantage of no payments during this time.
  • Reduced out-of-pocket expenses: With a one-time close construction loan, borrowers don’t need to pay for the construction upfront and then secure a separate mortgage. Instead, the mortgage covers the construction costs, leading to lower out-of-pocket expenses and increased savings.

These benefits make construction-to-permanent loans an appealing option for buyers seeking to build their dream home while enjoying convenience, cost savings, and flexibility throughout the process.

the bottom line: Your Answer in Today’s Market

Whether you’re hesitant to purchase an existing home or facing limited inventory in your area, this loan program is the perfect solution for you. Here at Loan Pronto, we specialize in making your dream home a reality with our single-close new construction loan. With just one approval, one closing, and one low down payment, you can skip the hassle and start building the home you’ve always wanted.

Reach out to our trusted mortgage consultants today to explore your options. Get a free rate quote or fill out our online loan application to get pre-approved.

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