New Construction? A Two-Time Close Loan Could Be Right for You

4/16/2024 8:00:00 AM

Interior of a house under construction with exposed wooden beams, partial framing, and a staircase in a sunny environment.

Building a new home is an exciting endeavor, one that comes with unique challenges. The first step in the journey is determining your budget and confirming your ability to obtain the necessary financing. For new home construction – and especially for new construction in a declining interest rate environment – a two-time close loan could be a great option.

A two-time close is a type of construction loan that’s split into two phases – the construction phase, and the permanent financing phase. During the construction phase, a loan provides the funds to buy (if necessary) the site and to pay for any improvements. Once construction is completed, the permanent loan pays off the construction loan by refinancing the existing debt into whatever mortgage loan option you prefer.

The biggest advantage of two-time close loans compared to other new construction loans is flexibility, as they better manage the ability to cover cost overruns and changes to the scope of your project. Additionally, two-time close loans provide versatility to adjust the permanent financing terms.

And in a declining rate environment, two-time close loans could provide the benefit of helping you get a more favorable interest rate. Because you don’t have to lock in your rate until closer to the end of the project, you could be able to take advantage of lower rates than when your construction began.

This article was published in the Mortgage Spring Newsletter 2024.

*Subject to credit approval. Program guidelines are subject to change without notice. Not available in all markets. Other restrictions apply.

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