Obtaining Permanent Financing

• Types of Permanent Financing
• Applying for Permanent Financing

Once your construction project is complete, it's time to secure permanent financing for your home. This involves obtaining a long-term mortgage to replace the short-term construction loan. Here's what you need to know about obtaining permanent financing:

Types of Permanent Financing¶

There are two primary methods for securing permanent financing:

1. Construction-to-Permanent Loan: This is a single loan that covers both the construction phase and the permanent mortgage. With this option, you can lock in your mortgage interest rate during the construction phase and avoid having to apply for a separate mortgage loan. Once the construction is complete, the loan automatically converts to a traditional mortgage. This simplifies the process and reduces the paperwork and closing costs associated with obtaining two separate loans.

2. Stand-Alone Permanent Mortgage: If your construction loan doesn't automatically convert to a mortgage, you'll need to refinance it into a new mortgage loan. This involves applying for a separate mortgage once the construction project is complete. You'll need to shop around for the best mortgage rates and terms to pay off the construction loan and secure long-term financing for your home.

Applying for Permanent Financing¶

When applying for permanent financing, you'll need to follow a similar process as you would for any traditional mortgage loan. This includes:

1. Researching lenders: Compare the loan offerings from various lenders, including banks, credit unions, and online mortgage companies. Look for the best interest rates, terms, and fees for your specific needs.
2. Gathering documentation: Lenders will require financial documentation to assess your creditworthiness and ability to repay the mortgage. This may include pay stubs, tax returns, bank statements, and information about your debts and assets.
3. Pre-approval: Obtain a pre-approval letter from your chosen lender to streamline the loan process and demonstrate your creditworthiness. This can also help you determine the maximum loan amount you qualify for.
4. Appraisal: An appraisal of the completed home will be necessary to determine its market value. The appraised value will influence the amount of the mortgage loan you can obtain.
5. Loan application: Complete the loan application, providing all required documentation and information. Be prepared for a credit check and a thorough review of your financial situation.
6. Loan underwriting: The lender will evaluate your loan application and verify your financial information. They will assess the risk of lending to you and determine the terms of the loan.
7. Closing: Once the loan is approved, you'll attend the closing, where you'll sign the mortgage documents and pay any required closing costs. The construction loan will be paid off, and the permanent mortgage will take its place.

Start preparing early, stay organized, and maintain communication with your lender to ensure a smooth transition from your construction loan to your permanent mortgage.