One-Close Colorado Construction to Permanent Financing
You have the option of securing a one-close construction to permanent loan. This means that the permanent mortgage and the construction loan close at the same time, prior to the start of construction.
The advantage of this type of financing can be a slight reduction in fees associated with the mortgage and construction loan process. This advantage can be offset by the fact that any increases in the actual cost of construction (versus the projected costs) must be paid for directly out of your pocket. Increases in cost can be a function of even slight changes in design or fixtures.
Additionally, equity in the project and the loan to value (LTV) of the permanent mortgage (the difference between the cost of construction and property acquisition, and the value of the loan - or how much you put down) are strictly a function of how much you choose to put down on your new home. Any additional equity associated with the increase in value of your home after completion as compared to the cost of building is unrealized until you refinance or sell your new home. This can be an important consideration when evaluating the cost of private mortgage insurance.
One-close mortgages are available for a wide range of borrower profiles, including conventional and alternative solutions. In many cases LTV's of 95% can be supported with the one-close solution (dependent on borrower qualification and program restrictions). Please talk with your mortgage consultant for more information and to see which programs are available for you.
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