How Does a Construction Loan Work?

By Frank Binetti

President of Inland Mortgage

Are you thinking about building a new home in a rising rate environment?

There’s no reason to be nervous. For many homebuyers, building a custom or semi-custom home, when there’s a strong chance that interest rates could increase significantly during the construction period, is a real cause for concern. Higher interest rates and then a higher mortgage payment once the home is complete is a real possibility.

Just a one percent increase in rate on a $500,000.00 mortgage loan amount equates to more than $300.00 per month in additional monthly mortgage payment. With a construction time periods as long as 12 months or more, that’s a lot of uncertainty worry. Especial when rates are predicted to climb. As a builder, the last thing you want to be concerned with is having a completed home with a homebuyer that is scrambling at the last minute for financing or worse yet, no longer qualifies for their mortgage.

That’s why many homebuilders are taking advantage of the One-Time Close Construction Loan. Rather than a traditional construction loan where there’s uncertainty about what your homebuyers rate will be until the construction is complete, you and your customer will know everything upfront and avoid any last minute surprises. As a builder you don’t need to be concerned with financing options as the borrower is responsible for obtaining the financing and making the monthly payments. The construction financing becomes the homebuyer’s responsibility along with the lender. You don’t have to factor in these interest charges to the price of the home or manage the monthly payments on your line of credit.

The rate is fixed during the construction phase and the remains the same as you lock in to a 5/1, 7/1 or 10/1 ARM end loan prior to close. The Maximum Loan to Value is 90%. Inland Home Mortgage can finance loans up to $4,000,000.00.

Oh, and the fees associated with those old time, traditional multiple payout loans, there’s none of that. One close convenience and savings to boot. Lower costs, lower rates and more peace of mind for all involved. Relax, we have you covered. Call Inland Home Mortgage (877) 838-4462 or go to for more information. Ask for Katina.