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From buying the perfect lot, to planning your ideal layout, building your next or forever home can be exciting to dream about. However, it can also be overwhelming. And we get it – It’s a big investment and you want to make the right choices!
As you weigh the pros and cons of buying versus building, we’d like to ease your mind about the construction lending process. We sat down with our construction lending expert to answer some questions that will help you decide if a construction to permanent loan is right for you.
Q. How do construction loans work?
A. APCO Employees Credit Union offers Construction to Permanent Loans, or C to P loans for short. C to P loans are one-time close construction loans with a short-term, fixed-rate construction period which converts to a permanent mortgage upon completion of construction.
Q. How do payments and interest work with a C to P loan?
A. I get this question often! The appraisal and the loan amount are based on the finished property’s value, and the terms for both stages of the loan (construction and permanent financing) are set in advance.
During the loan’s construction phase, interest is charged only on the outstanding principal balance, and is billed monthly, based on the remaining outstanding balance. During this same period, the member can make six withdrawals for the build. Upon completion of construction and inspection, the loan will convert to a long-term mortgage. At this time, the borrower will begin making principal and interest payments at the previously determined rate.
Q. What are some key benefits of APCO’s C to P loan?
A. With APCO’s C to P loan, one loan and one closing cover both the construction phase and the permanent financing. This streamlines the application process and can minimize closing fees. Plus, your rate and loan term are determined in advance. Another added benefit of building with APCO is individualized service. We will be with you every step of the way to make sure money is available when you need it during the building phase, according to the disbursement schedule, and generally disbursed within a few days after inspection of previous work.
Q. What details does a Member need before a C to P loan can be approved?
A. As part of the application approval process, the Member may be asked to provide documents including bank statements, proof of income, and tax returns. There will also likely be a cash down payment required, and the Member will also be required to provide the following:
I would like to add that we will be available to guide the Member through submitting the required documents and answer any questions they have along the way.
Q. Can the Member serve as the builder of their own home?
A. Unfortunately, no. The Credit Union only accepts pre-approved builders who are bonded, insured, and have required credentials.
Q. Are there any restrictions on the type of home being built?
A. The Credit Union finances single-family homes. The only restrictions are atypical homes such as underground, solar glass, or log homes.
Q. How do our Members qualify for a C to P loan?
A. That’s another great question. We do have guidelines for Member qualification. If you’re interested in learning about what’s needed to qualify for our C to P loan, visit us online to fill out the contact form on our webpage.
Q. Lastly, if a Member wants to apply, where do they start?
A. When a Member is ready to apply or wants to discuss their project, they can visit us online to learn more and fill out the contact form on our webpage. From there, our construction expert will give the Member a call to discuss the details of their project and answer any remaining questions they may have. Once it’s determined we’re a good fit, the Member will complete a formal application through our online mortgage portal.
LEARN MORE
Learn all about the APCO Home Equity Line of Credit (or HELOC), the benefits, process and some ways APCO Members utilize their HELOCs in this interview.
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