Are you working on a project that may need construction lending to fund the job? Are you unsure what goes into the concept of construction lending? Here, we will provide a simple explanation of what goes into construction lending.
At Rocky Mountain Mortgage Co., we are proud to provide construction lending in El Paso to project managers who need help funding a project. We make our loans short-term, so you don’t have to spend years paying them off. If you’re interested in having a free consultation, give us a call at (915) 593-3111 or contact us online today!
What You Should Know
A construction loan is a short-term loan that has a high interest rate and provides you with the funds to build your project. In construction lending in El Paso, the lender pays your contractor in increments as they complete different phases of your project. Once the project is complete, you can either pay off the loan in full or convert it to a conventional mortgage.
A construction loan will cover the following costs of a project:
- Worker Labor
- Building Materials
- Plans, Fees, and Permits
- Contingency Reserves
- Interest Reserves
- Closing Costs
How Construction Lending Works
El Paso construction lending will cover the construction and the cost of the land; it does not cover the designing period of the project. Compared to a mortgage or car loan, there is more involvement from the lender. They are going to want to see everything from your estimated budget to the building schedule. After hearing all of this information, is when the lender will determine your loan amount.
As mentioned above, once approved, you won’t receive the loan amount, your contractor will. The lender will pay the contractor in intervals throughout the project. The lender will also check in periodically with the contractor on how much progress has been made before sending additional payments. Each payment will be for a specific part of the project. For example, the first payment will most likely cover the permit costs and land preparation.
Types of Construction Lending
There are a few different types of construction lending in El Paso to choose from. The types of loans and a brief explanation of each are listed below.
- Construction to Permanent- This is when a construction loan turns into a mortgage at the end of the project. This can help you avoid the risk of being unable to secure a mortgage.
- Construction Only- This loan only covers the building part of the project. Once the project is complete, you are responsible for paying the remainder of the loan.
- Renovation- If you’re renovating rather than building new, this would be the loan to look into.
- Owner Builder- This is when you are both the contractor and owner. To be approved for this loan, you will have to show the lender your experience and skills before being approved.
- End Loan- This is a mortgage that involves taking out a loan at the end of the construction.
Construction Lending in El Paso
At Rocky Mountain Mortgage Co., located in El Paso, we offer construction lending options to those who are ready to tackle construction projects. If you are interested in having a free consultation with one of our loan officers, call (915) 593-3111 today!