Houston Construction Loan Specialist
HomeStart Capital is one of the few lenders in Houston and surrounding areas that can still do one-time and two-time Construction Loans. Construction loans are a special type of loans in which the proceeds are used to pay for the construction of the property. This type of loan can used to build your home from scratch or complete major remodeling of your home. The terms and interest rate will depend on the scope of your project. In most construction loans, you pay interest only during the time of construction. All construction loans will have a limited term during which the project must be completed. At HomeStart Capital we can help choose between a one-time or two-time close construction loan based on your needs and goals
One Time Close
The Construction Loan and the permanent loan terms are determined at the beginning of the process. Sums of money will be disbursed from the loan principal periodically to the builder until completion pf the propject. During the construction phase, the borrower will make monthly interest payments based only on the outstanding balance in any given month (similar to a revolving account). Upon completion of the home, the loan will roll over into the permanent financing, and the borrower will make monthly payments in accordance with the terms of the note. The biggest advantage of a one-time close is the ability to lock in the interest rate and term of the permanent loan far into the future and the elimination of a second underwriting for the permanent loan. The draw back can the limited terms available on the permanent financing as well as the permanent rate offered is typically slightly higher than the current rates but again this option make sense because the borrower is able to eliminate the risk of market movement during the time of construction.
Two Time Close
This option works exactly the same during the construction phase of the project. Once the property is completed, we will canvass the market to search for the best possible rates and terms for the permanent loan. The loan would then be refinanced into a permanent loan with a separate investor. The biggest advantage of a two-time close is the ability to ensure you recieve the most favaorable interest rate as well as greater access to longer terms which on the one-time close are typically limited to a 15yr payout whereas on the two-time close we have 30year pay out options available. The draw back can be slighly higher closing costs due to two loan closings (hence the name) as well as the need to go through two underwrittings with two different investors. Call your professional loan officer in Houston to learn more about the pros and cons of construction loans (713) 275-2785.
How It Works
In its simplest form, a construction loan is a loan that you take out to build your own home or a major home remolding project. If you want to construct a building for business use or for rental purposes, you can also apply for a construction loan. The fundamental guideline we follow when extending you credit under this program is to check your ability to pay the loan back; primarily through the expected income and its ability to service the debt on a monthly basis. This is called cash-flow lending. Although the value of the property after completion is taken into consideration our investors are primarily interested in you debt-servicing ability. Even though during the time of construction you will make interest-only payments, you should qualify with the full projected monthly payment. It is imperative that you learn all of your options before you start any type of construction. Call to set an appointment with one of our professional loan officers today (713) 275-2785.
The primary benefit of the construction loan is that it enables you to build your own house or remodel your home through your builder of choice. In addition, because you only have to make the interest-only monthly payments during the construction phase you can afford to hold on to your current home while your new home is completed.
You should start investigating construction loans as soon as you have decided to build your home. Even if you are unsure of the cost of construction, you can meet with one of our professional loan officers to get the necessary details.