If you are evaluating building a new construction rather than purchasing an older home, it is helpful to understand the mortgage programs on the market. Financing new construction is much different than that of an older one. The conditions, interest rates, and processing will differ. Below are a few different MA new construction mortgage programs.
Construction Mortgages
Construction mortgages are short-term solutions designed to make funds available during the construction process. There is usually a schedule for when money is given and in specific amounts. Particular goals must be accomplished for release of funds to the builder. The expenses, interest charges, and other conditions will vary by lender. Construction mortgages are considered risky, thus conditions are often more intricate than other home mortgages. Upon conclusion of the construction period, a new mortgage must take over.
Convertible Mortgages
Construction to permanent mortgages involve a single closing. While the home is being built, interest-only charges are often required. Once the home is over, it turns into a normal loan with usual mortgage payments. Interest rates are typically determined when construction starts, but the rate lock for the permanent part of the mortgage might have an expiration. If your home is delayed, then the interest rate may change for the permanent mortgage.
Builder Financing for New Construction
This is the best alternative for a buyer because no additional mortgage is needed by the buyer. Buyers are usually required to give a significant deposit and to pay for upgrades out-of-pocket. Buyers must close on a mortgage before taking possession.
MA New Construction Mortgage Programs
Mortgage programs available will be based on who owns the lot or the builder does. Buyer-owned lots typically need a construction mortgage of some type. Builder financing is generally offered within builder-controlled subdivisions. Programs may also range by mortgage company as some have unusual alternatives. Contact a lending specialist to understand all of the different MA new construction mortgage programs and associated expenses prior to making a decision.
