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Obtaining a North Carolina Construction Loan

Obtaining a North Carolina Construction Loans

It can cost a great deal of money to get the home of your dreams, especially when you have something very particular in mind that is not already available on the market. Extensive custom work is expensive in itself, and getting the financing to make it possible can be difficult for someone who is not accustomed to dealing with lenders. Before you rely on North Carolina construction loans to fund the building of your new home, there are some things that you should understand about the way that they work.

Though it might seem as if a normal mortgage should always apply to getting a home, that is not true. A mortgage is typically secured by giving the lender the right to take possession of the house if the payments are not made. For a construction loan, the house in question does not yet exist. That makes this sort of tactic impossible to pursue. For this reason, these loans are not paid by the bank all at once as would be true for a mortgage. Instead, you have to work out a schedule with the lender and the builder for when money will disbursed. This usually happens over the course of the building process, until the home is complete.

It is possible for a construction loan to turn into a mortgage, however. In this type of lending arrangement, the borrowing starts out as a temporary loan for construction. You may even only have to pay the interest due on the money you are borrowing. Once the process is complete and a certificate of occupancy is issued for the house, the entire thing is then converted into a mortgage that is secured by the title to the new home. This makes it possible to get the money needed to build and then have a mortgage without having to go through the lending process twice.

It is important to understand the special traits of this type of loan before you decide exactly how you want to handle the arrangement. They can make it possible to build the home of your dreams, but you have to make sure that details like when the money will be made available are agreeable to everyone, including both the lender and the people who are doing the actual construction work.