New Home Construction Loans in Oregon

Construction to Permanent Loans

Construction to permanent loan programs provide for both a construction and a permanent loan, all in one transaction and with one closing. You will only have to sign one set of documents. The program also provides with plenty of time to complete the construction and a generous repayment term.

Construction loans are different from standardized mortgage loans underwritten to Freddie Mac or Fannie Mae guidelines. That said, there are some common features to the construction loans.

Construction loans typically allow interest-only payments during construction. Construction loans are usually variable-rate loans based on the prime rate or some other short-term interest rate. The owner, the contractor and the lender establish a draw schedule, based on stages of construction and interest is charged on the amount of money disbursed to date.

Another variable in construction loans is how much of the construction cost the lender is willing to lend. If you already own the land, that can be considered as equity in the construction project.

Many homeowners use construction-to-permanent financing programs where the construction loan is converted to a regular 30yr fixed mortgage after the certificate of occupancy is issued. The advantage is that you only have to have one application and one closing.

You may be willing to pay a slightly higher rate on the construction loan if you're receiving construction-to-permanent financing and get better mortgage terms and rate on the permanent loan.