The Advantages of a Single-Close Construction Mortgage

With the tight-supply of homes in the Houston, Austin, Dallas, and San-Antonio market-places many are choosing the option of buying a lot or a tear-down home and building their dream home. There are several advantages to building your own home including paying only the cost of the land with the cost to build, and designing your home exactly the way you’ve dreamed about your entire life.

There is a specialized mortgage product for building your own home and it is called the single-close construction loan or a one-time close mortgage. One large advantage it has over taking out a construction loan with a bank and then having to find permanent financing after it’s completed is that this one mortgage is both your construction loan and permanent mortgage on your new dream home.

If you take out a construction loan from a bank you have interest-rate risk between the time it takes to construct or build the home and the time it’s complete and ready for you to take out a permanent mortgage on the home. In today’s mortgage market of rising rates that’s quite a risk to take.

The one-time close mortgage alleviates all interest-rate risk because your rate is locked up-front as this mortgage is for both the construction loan and the permanent financing or mortgage on your home. Think about that. The average time to build a custom-home is between eight and eighteen months. Do you really want to wait and see where mortgage rates are eight to eighteen months in the future before you could convert a traditional construction loan to a permanent mortgage?

Of course not you would rather have the rate locked up front, and sleep well every night your home is being built.

The other advantage to a single-close mortgage is lower closing costs. You only have one appraisal at the begining versus having one for the construction loan and then having to have another when you would secure a permanent mortgage if you were going the traditional construction loan route.

The same goes for title policies. The single-close mortgage just have one title policy when you close on the loan. Otherwise you will have to pay for one title policy for the construction loan, and then pay for another title policy for the permanent mortgage.

If you are building a home the way to finance it is the single-close contruction loan. This mortgage allows you to mitigate any future interest-rate risk and reduces the cost by having only one closing and not two.

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