Construction Loans: What They Are And How They Work

Construction loans provide the funds necessary to buy land and pay for the materials and labor that go into building a new house. Construction loans let homeowners borrow money to pay for building a new home. This money can also be used to purchase the land you’re building on. If you own the land, you may be able to use it as collateral for your loan. Building a home is not a simple process. To meet the wide variety of needs of homeowners, there are several types of construction loans available—primarily, one-time close and construction-only loans. One-time close loan finances construction of a home and then converts into a fixed-rate mortgage once the home is completed. With a construction-only loan, the lender issues a short-term, adjustable-rate loan that is used to complete construction of a home. After construction is complete, the loan must be paid in full or refinanced into a mortgage. This requires two application processes and two closings. There are many lenders in Cache Valley who are able to provide construction loans. Several can also provide one-time close loans. Some of our preferred lenders include Alta Bank, Washington Federal (WAFD), Bank of Utah, First Colony Mortgage, Cache Valley Bank, etc. Reach out with questions about construction financing!

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