What is a construction loan and how does it work?
A construction loan is a series of reimbursements paid in draws to your builder as your construction project is brought to reality. Once all disbursements have been paid and your project is complete, the construction loan will be modified into a permanent home loan of the mortgage program that you choose. These construction loans are referred to as one-time-close construction loans, as you will only be required to pay closing costs once. No fees are required to be paid at the time of the modification of your construction loan into a permanent home loan. So, you can finance the initial purchase of the land (or the payoff of a land loan if you already have taken title to the land) and the turn-key cost of building your new home and effortlessly convert to a permanent mortgage when your home is finished with just one set of closing costs.
