Construction to Permanent Loan (interest rate, real estate, credit, banks)

[ponyupgrl]

Has anyone built and gotten this type of loan recently? What are interest rates that can be expected compared to traditional 30 year mortgage interest rates?

We're considering building, and I'm struggling to see any documentation on what to expect out on the internet (and I'd prefer to have some general understanding before talking to actual lenders).

[LoanChic]

With a construction to perm loan you'll pay interest only on the portion you draw. So if your loan amount is $400k, you don't get it all at once. Your builder will request a draw for a certain amount of money at certain points of the construction. You will pay monthly on the balance of the amount drawn. When construction is complete, you'll convert your loan to a permanent mortgage with principal and interest payments.

[ponyupgrl]

Thanks LoanChic. Do you know if the rates for the permanent (mortgage) portion of such a loan are somewhat comparable to traditional mortgages? Or are they much higher?

[Bamaman1]

The interest rates will be higher. I suggest you check with local banks and credit unions for their current rates.

Note: If you do build, I would get a real estate attorney to draw up a contract with the builder. Above is correct about the monies being paid out in stages. You might need guidance on what's normal and fair. You always want to have time constraints included in the contract too.