Why Would I Need a New Construction Loan?

Finding the perfect house can be challenging to say the least. Style, size, and location are just a few of the things people consider when house hunting. Often, when people can’t find their dream home, the one that checks all their “must have” boxes, they decide to build. Galipeau Mortgage doesn’t offer a construction loan program at this time, but did you know you don’t need to get your end loan through your bank? Most people don’t know this!

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How Do Construction Loans Work?

You can use a construction loan to cover the total cost of building a home, including the land, labor, materials and permits. The approval process for a construction loan is similar to that of a typical mortgage.  We'll work closely with you and your bank during this phase.  

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After the home’s construction is complete, we'll work with you to convert your construction loan to a traditional mortgage. The same documentation is used on both your construction loan and your end loan. So, the process is seamless.

 

Construction Loans Vs. Traditional Mortgages

There are several key differences between a construction loan and a traditional mortgage. Construction loans are short-term loans, usually no longer than a year in length. On the other hand, traditional mortgages are long-term loans, with terms typically ranging from 15 – 30 years. With a mortgage, the borrower receives the money in one lump sum. Upon closing on the loan, the payments start immediately and consist of both principal and interest.  When you take out a construction loan, you’ll usually make interest-only payments while the construction is being completed. Once your home is complete, you’ll take out a traditional mortgage, which will payoff your construction loan.  We’ll work closely with you and provide as much information as you need so you can make an educated decision on which traditional mortgage aligns best with your goals.