Wednesday, January 2, 2008 - Article by: Lender411 Member
A C/P or Construction-to-Permanent, also called "One Time Close" is a type of construction loan that rolls directly into your permanent financing once your home has received its Certificate of Occupancy. Typically, the borrower qualifies for the loan to the guidelines of the permanent loan. The borrower can select whatever end loan program that a lender may have in their portfolio (ie. 30 year fix; 3/1, 5/1, 7/1 ARMs, Interest Only, 15 year fix, etc.). The construction period is the riskiest part of the loan. Thus, lenders will charge a little more in fees to administer the loan and a higher interest rate during this period. Once the home is complete, then what has been actually used from the construction loan will convert into the principal amount of the permanent financing. Lenders who offer a CTP program typically do so because they want your permanent loan. Once the home is built, the lender now has a secured asset for their loan.
A Construction Only loan is obviously a construction loan only for the purpose to build the home. Once the home has been completed, the borrower is responsible to find a permanent loan to payoff the construction loan. In today's market, the construction only loan is mostly used by builders who build a home with the purpose to sell and owner occupied borrowers who have credit challenges.
Why would someone want to use the "Construction-to-Permanent" loan?
Why would someone want to use the "Construction Only" loan?
If you have any further questions regarding this topic, please feel free to call us at 480-305-8905.
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8905 - office
480-393-8801 - fax
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