CONSTRUCTION/RENOVATION LOANS

A construction loan is a short-term loan designed to finance the construction of a new home or major renovations to an existing property. It typically has a variable interest rate and is repaid in full once construction is completed. 

There are two main types of construction loans: construction-to-permanent loans, which automatically convert to a traditional mortgage after construction, and standalone construction loans, which require a separate mortgage upon completion. 

Funds are typically disbursed in stages as construction progresses. The lender may inspect the work before releasing each payment to ensure it aligns with the project's timeline and budget. 

Construction loans are tailored for individuals who want to build entirely new homes or undertake substantial ground-up construction projects. They are typically short-term loans with higher down payment requirements. On the other hand, renovation loans are designed for existing homeowners looking to renovate, repair, or upgrade their homes. They can have a range of terms and down payment options and are used to improve the value and comfort of an existing property. 

There are several types of renovation loans, including FHA 203(k) loans, Fannie Mae HomeStyle loans, and VA renovation loans. Each has its own eligibility criteria and terms. 

Yes, many renovation loan programs allow financing for energy-efficient improvements, which can not only improve your home but also reduce long-term energy costs.