How Psecu Can Help You With Construction Loans

Building a home is a great way to meet your housing needs and can give you a sense of accomplishment. However, it is not something to rush into. You will need to work with a team of people, from a real estate agent to an architect, and you will need to get a different type of loan than if you were purchasing an established property. Construction loans are a type of mortgage for those building a home, also known as a one-time, single-close or construction-perm loan. PSECU offers construction loans and mortgage rates to help make your dream home a reality. They offer adjustable- and fixed-rate mortgages and various term options to help you find a mortgage that fits your budget.

PSECU construction loan consultants

Building a home is an exciting prospect, but it can be a daunting process. When you build a home, you will need to work with a team of people, from real estate agents to architects, and you will need to get a different type of loan from purchasing an existing property. This is because the home does not exist yet, so it cannot act as collateral on the mortgage. This is why construction loans differ from standard mortgages.

PSECU offers construction loans and mortgages, and their experienced mortgage consultants are on hand to help you finance the construction of your dream home. They can guide you through the process, which is similar to applying for a traditional home loan. You can apply online or by contacting a mortgage consultant. They will be able to advise on the various term options, including fixed-rate and adjustable-rate mortgages, to help you find a mortgage that fits your budget.

When financing a new build, the lender may need to approve the builder before construction begins. This is the case at PSECU if you are getting a construction draw loan, where funds are disbursed directly to the builder. This ensures the home is built to the specifications provided, and the buyer and lender end up with a home that is worth the appraised amount. If you are buying a new build, you don't need to have the builder approved.

A construction-to-permanent loan, or C2P, is a type of mortgage for those building a home. It funds the purchase of land and the costs to construct the home. Once construction is complete, the loan converts into a traditional mortgage. First-time homebuyers can qualify for a construction loan as long as they meet the lending guidelines for loan approval.

Construction loan application process

PSECU offers construction loans to its customers. The process for securing a construction loan differs from a typical mortgage. Construction loans are short-term loans that can be used to build a home. They are based on budget and appraised value estimates.

The first step in the construction loan application process is to get preapproved. This provides an understanding of how much you will be able to borrow for the project. The next step is to apply for the loan. At PSECU, you can apply online or by contacting one of their mortgage consultants. After submitting your application, you will be provided with a list of supporting documents needed for loan approval. This includes financial statements (debt, income, and assets), a signed construction contract, and a construction timetable. You will also need to provide proof of homeowners insurance, which is required by most lenders.

Once you have agreed on the terms with your builder, you will need to supply a copy of the contract for loan underwriting. The underwriting process assesses your financial stability and the feasibility of the construction project. After your loan is approved, you will be able to close on the loan and begin construction.

It is important to note that the builder may need to be approved by the lender before construction begins, especially if the lender will be disbursing funds directly to the builder. This process helps ensure that the home will be built according to the specified plans and specifications.

Construction loan rates

Construction-to-permanent loans are a type of construction loan that combines the construction loan and the mortgage into one loan, with one closing. This can save time and reduce costs. These loans can have adjustable or fixed interest rates. For example, First Bank in North Carolina offers a one-time-close construction-to-permanent loan with a fixed construction interest rate for 12 months.

Construction loans are also available as stand-alone products, separate from a mortgage. These loans often have terms of just one year, and the interest rates may be higher due to the lack of collateral. The money is typically paid directly to the contractor or builder in instalments, upon completion of certain milestones.

PSECU offers construction loans with adjustable and fixed-rate mortgages available, as well as various term options. They do not charge higher rates for construction loans compared to existing home loans. PSECU also offers construction-to-permanent loans, which are also referred to as "one-time, single-close" or "construction-perm loans."

When considering a construction loan, it is important to understand the specific rates and terms offered by the lender. It is recommended to speak to a mortgage consultant to guide you through the process and ensure you have all the necessary information.

Construction loan calculators

Loan Type

The first step is to select the type of loan you are seeking: a purchase or refinance loan. This is important as it determines the subsequent steps and calculations.

Cost of Land and Construction

After selecting the loan type, you will need to input the cost of the land and the construction. This is a crucial step as it forms the basis for calculating the loan amount and understanding the overall financial commitment.

Loan and Mortgage Details

The next step is to provide details about the loan and mortgage. This includes information such as the loan interest rate, the mortgage rate, and the mortgage term. The loan interest rate is the percentage at which interest accrues on the borrowed amount, impacting the overall cost of the loan. The mortgage rate is the interest rate applied to the mortgage loan, influencing monthly payments. The mortgage term refers to the predetermined time period in which the borrower will repay the mortgage, commonly 15, 20, or 30 years.

Down Payment

The down payment is the initial payment made when obtaining the construction loan or mortgage. It is typically a percentage of the total project cost.

Length of Project

The estimated duration for completing the construction project is another important factor. This can influence the loan terms and interest rates applied.

First Interest-Only Payment

In construction loans, during the initial development phase, it is common to have a period where only interest payments are made, without reducing the principal balance. This is an important consideration for cash flow management.

It is always recommended to consult with qualified professionals, such as PSECU's mortgage consultants, for precise calculations and guidance. They can help you navigate the complexities of construction loans and ensure you understand all your options, including competitive rates and various term options.

Construction loan options

Building a home can be a great way to meet your housing needs. However, it is not something to be rushed into. There are pros and cons to having a home constructed, and the financial process of building a home is much different from purchasing an existing one.

When you buy an existing home, it acts as collateral on the mortgage. If you have difficulty making payments on your mortgage, the lender has the option of taking your home. When you’re building a home, the collateral doesn’t exist yet, so the lender is taking on more risk. This lack of collateral is one of the reasons why construction loans differ from standard mortgages. The way the money is distributed is also different.

PSECU offers construction loans, mortgage loan rates, and calculators to help make your dream home a reality. Their mortgage consultants are experienced professionals who are ready to help you finance the construction of your dream home.

A construction-to-permanent loan is a type of mortgage for those who are building a home. It is also referred to as a “one-time, single-close” or “construction-perm loan”. It funds the purchase of land and the costs to construct the home on the land. Once construction is complete, the loan will convert into a traditional mortgage. First-time homebuyers can qualify for a construction loan as long as they meet lending guidelines for loan approval. The builder, their draw schedule, and additional required information must be reviewed and accepted by PSECU.

Financing up to 90% LTV is available except on 1/1 Jumbo Construction ARM’s, which are limited to 80% LTV. Amounts greater than 80% LTV are subject to private mortgage insurance requirements. Construction financing only applies to Primary Residences and 2nd homes. Construction loans do not apply to modular, prefabricated, or panelized dwellings. Construction loan terms cannot be combined with the First Time Homebuyer Program.

Frequently asked questions