Video Transcript
Hey this is mortgage Mario based out of Woodstock Georgia. So construction loans are essentially for
any buyer that wants to build a house
but doesn’t actually have the capital to
pay out of pocket for the construction
phase of a home so that’s where a
construction loan would come into play
and essentially you can use that for the
building supplies to buy the land to pay
the permits and to pay the contractors
responsible for actually building the
house so essentially you’re going to pay
interest only on the money that you’re
borrowing you’re going to typically
borrow in draws because there’s gonna be
different phases of construction in
order to complete the construction and
it’s gonna be based off Prime and Prime
is the gold standard of Bank rates that
goes by the Fed rate so typically Prime
is about three percent above the Fed
rate at the time so it can be a variable
rate and you are paying interest one
thing to be aware of you’ll never get
that that money back where you’re paying
interest on it’s essentially how the
lender will make money off of being able
to make this construction uh phase
um occur and essentially once you’re
done with the construction say that you
borrowed you know three hundred thousand
dollars to buy the land to pay the
contractors to pay for the building
supplies to pay for all the permits and
you have a finalized product which is
the house then it will convert to an
actual mortgage and the mortgage will
buy up that construction and will
re-amorize the 30 year typically you’ll
want to do like a fix so whatever type
of mortgage that is it could be it’s
going to depend on your situation it
could be FHA it could be USDA it could
be conventional could be VA if you’re a
veteran but essentially all of them will
act a certain certain fashion where it
does convert to a permanent loan and so
you technically have three different
types of construction loans you have a
pure construction loan where it’s
actually just a construction learning
closing construction loan and um very
pure in nature the second one you
actually have a hybrid loan it’s a
construct action or permanent loan one
set of closing costs is actually well
during the construction phase is the
construction loan and then it converts
into an actual mortgage typically that’s
going to be unconventional uh you need
about five percent down uh VA it
actually could be zero USDA could be
zero down
um and then you actually have what’s
called a rehab loan so say you have a
house that won’t appraise for a typical
you know conventional appraisal but
you can actually get what’s called a
rehab loan where you have a partially
completed house maybe the house needs a
lot of work it’s got a lot of wear and
tear or maybe another Builder started
the building process but there’s not
drywall up or anything like that you can
actually get what’s called a rehab loan
which falls in its own different
category and essentially they will they
will loan out the money needed to
rehabilitate the house and then once it
can it will convert into a mortgage and
all the money that was lent out to the
contractors to build the house will go
into one final loan amount so I hope
this helps and always feel free to visit
mortgagemario.com to learn more or set up a time to meet up in downtown Woodstock Georgia.
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