It’s easy to get tunnel vision when you’re building a new home and it’s nearly finished. You can practically feel that beautiful wooden railing and imagine your shoe collection in that gorgeous wardrobe. These insights will keep you going as you build your home, but before you pack up, you need to make sure you understand the loan process, especially how to close your permanent loan.
APM offers both one-time and two-time construction loan options, allowing homebuyers to choose the structure that best suits their goals, timeline, and comfort level with market conditions.
With a two-time construction loan, the first loan covers the cost of the land, building materials, labor, and required permits. Since this loan funds the construction phase, it’s always a good idea to get pre-approved early to better understand your budget and borrowing capacity. APM’s loan advisors can help you through this process.
During the construction process, which typically takes 12 to 18 months, payments are usually interest-only and depend on the funds withdrawn. Construction loans work similarly to a line of credit, releasing funds in a series of draws when specific phases of construction are completed. Interest is charged only on the amount used, and payments can often be made monthly or divided into the loan.
As construction nears completion, permanent financing becomes the focus. With two closings, you will be eligible for your permanent mortgage at the end of construction, usually 45 to 60 days before completion. With a one-time closing, your permanent financing is already approved in advance, and the final steps focus on inspections and receiving the Certificate of Occupancy.
Your APM Loan Advisor will help coordinate every stage of the process, ensuring a smooth transition from construction to long-term homeownership, no matter which construction loan option you choose.
Document collection and credit check
First, we will collect updated versions of the documents we collected when we obtained your construction loan. This will include bank statements and payslips, as well as any life, income or employment changes. There may also be additional documentation that we require at this time.
You’ll want to keep your credit score high during the building process and Avoid any credit risks. We will need to run a new credit report as part of the permanent financing application process.
recommendation
A new assessment is not always necessary, but may be helpful during a double lockdown. This is because you may be able to modify your permanent loan based on this evaluation. If your appraisal is higher than the original value, you can use the new appraisal value to adjust your loan amount. Both VA loans and conventional loans allow for cash-out refinancing, so you may be able to tap into your equity at this time. Your APM Loan Advisor will be happy to discuss these options with you to see if this is the right strategy for your situation.
Approval of your loan
Once we have your final appraisal, your loan will be passed through our underwriting department for final approval. You have a few options for your permanent mortgage, which will be discussed when you apply for your construction loan. These loans include FHA, conventional loans, and VA loans. Each has its own advantages, as your APM loan advisor will explain. They will also review everything to make sure that what you thought you wanted when you started still works for you.
In a way, this final loan is similar to a typical refinance, meaning you’ll start paying off your loan like any other permanent mortgage. You can choose from fixed rate financing for 30, 20, 15 and 10 years.
Many borrowers choose to lock in a specific program and lock in their loan rate before construction begins. These long-term locks can bring peace of mind, knowing that you won’t have to pay a higher price once construction is complete. And don’t worry — your loan officer will review any changes in the market and discuss whether to keep the locked-in rate or set a new rate in case interest rates drop. We’ve got you covered!
closing
Our goal is to obtain final closing immediately after the final inspection, but the process can vary based on the builder and local requirements. You’ll need to be prepared to pay closing costs and sign the final paperwork. This will likely happen at a title company, so be sure to bring recent proof of identification with you, such as a driver’s license or passport.
Occupancy certificate
This is one of the last pieces that are turned on when building a house. Ironically, in many cases, this is not even a physical certificate! This simply means that your local government has approved your home for occupancy and that the home follows all required building codes. However, just because it is not a physical document does not mean it is not important. You need a certificate of occupancy to legally move in once construction is complete, which means we need it before we can fund your loan!
Move!
Once your loan is finalized, financing usually occurs the day after signing unless a different timeline is needed. From there, it’s time to move into your new home and begin the next chapter of homeownership. At this point, your loan converts to a conventional mortgage, with monthly principal and interest payments starting as specified in the terms of your loan.
At APM, we work to make the construction loan process as streamlined and straightforward as possible from start to finish. If any questions arise along the way, your APM Loan Advisor is always available to explain each step and provide guidance tailored to your situation.
To learn more about the complete construction loan journey, explore our website Construction 101 Resources and connections APM Loan Consultant When you’re ready to start.
