Building a dream home can be both exciting and confusing. Traditional home buying requires a mortgage to finance an existing home. Unlike this type of home buying, one time close construction loans allows planning, building, and taking out a mortgage to be in one convenient loan.

The Basics
A one time close construction loan, also called a construction to permanent loan, has changed a lot over the years. Previously, it was only good for a year and needed refinancing into a new loan when the home was completed. Homebuyers had to qualify for a new loan in order to have the old one refinanced into the mortgage. They ended up with two separate loans and two closing costs. With a one time close construction loan, everything is included.

Today, financing gives homebuyers better options. When you choose a one time close construction loan, there is only one closing date and interest rate. Be sure to ask lenders about locking in the interest rate so that it carries over when the house is complete.

Finding a Lender
Finding a lender for the one time close construction loan is not easy. Shop around and ask about low interest rates, payment schedules, building costs, and experience. It is wise to research different loan companies before making a decision. Ask questions and write down as much information as possible for future comparison.

After finding a lender, look at contractors and builders. An experienced professional will understand the needs of the customer and do a great job.

Getting Started
Now that the loan is secure, it is time to go over the plans with the contractor. Make sure that they understand exactly what is wanted and needed. It is very important to communicate any questions and concerns regarding the construction, cost, and completion time.

Plan the final construction within the 12-month window. Do not exceed a year or there can be penalties. The finance company will need to know exactly when construction will begin and end.

Payment Options
There are two ways to pay for the building costs. The homebuyer can choose a draw schedule, which schedules distribution of funds to the builder when certain percentages of the construction are completed. This puts the buyer in charge of making the payments to the contractor. For example, scheduled funds are released when the foundation is laid down.

The second option is a punch list, a list of things not completed or in need of fixing. The punch list allows the buyer to inspect the home after it is finished and write down anything that is not okay. The contractor will not receive payment until everything on the list is corrected.

Other Loan Qualifications
One time close construction loans are not just for building family homes. Other approved qualifications:

• Purchased rehab homes with at $16,000 worth of damage in need of remodeling
• Paying off or refinancing an empty lot to build a new home qualifies.
• Refinancing and repairing an existing home with at least $16,000 of repair

Every great house begins with a plan. Make sure yours begins with a one time close construction loan.