What You Need to Know About Construction Loans

Mortgage loan rates are headed toward historic lows according to many finance experts. Even with a Federal Reserve raise two months ago, the 30-year fixed rate mortgage continues to drop, and may even fall into the 2 percent range.

Experts can debate the causes for this plunge, but there is no question that this is great news for people looking to buy a new manufactured home. In addition to a mortgage loan, however, you will also need to obtain a construction loan to secure the purchase of your land and make sure the project is completed properly.

This is a standard part of the financing process, and LHC will be with you to make sure  you select the type of loan that works best for you, and to make the procedure as easy as possible.

Why Do I Need a Construction Loan?
This is where the money comes from to build your new manufactured home. Lenders receive detailed cost estimates, and buyers provide credit and earnings information as they would with any type of loan, prior to securing approval. Buyers who own the land where their home will reside can use the equity in their property as a down payment, which reduces their out-of-pocket investment.

What Types of Manufactured Home Loans are Available?
The option preferred by most manufactured home buyers is a construction-to-permanent loan, as this is one loan that covers both the construction of your manufactured home, and the mortgage that follows. Not only does this save time and paperwork, it also means you only pay closing costs once.

As with mortgage loans, clients can select from FHA, VA and conventional construction loans. With FHA or VA loans there are no payments made during the term of construction and no additional loans are required. These loans will finance in interest for the term of construction.

With a conventional loan the buyer is responsible for interest only payments on the funds released through the term of construction. All funds are disbursed as required with signatures on each draw from both the buyers and the dealer.

The construction loan will likely be offered at a fixed rate loan, since the needed construction time (usually 4-6 months) is short. Funds are disbursed as each phase of the project (foundation, construction, property improvements/upgrades) is completed.

How Can We Help?

Dealing with the complexities of construction loans is easier when you have a friend in the business, and that is what we hope to be. We have been through this process thousands of times with thousands of customers. We know what works and what doesn’t. We know what options are available depending on each buyer’s income and credit status.

Bottom line: we are here to make this easier for you, and to save you money wherever possible.