Working with a Lender

• In order for a loan officer or lender to grant you a construction loan, you'll need to convince him or her. This means coming to the meeting armed with contractor estimates, carpenter estimates and cost projections for everything from labor to materials. The better prepared you are to argue your case, the more likely the loan officer will trust your vision.
  
  

Unconventional

• Most construction loans are revolving lines of credit. Customers will need to access the cash on construction loans for payroll and materials. After construction has been completed, most construction loans come due, forcing customers to refinance into a conventional loan.
  
  

Construction-Permanent

• You can avoid two loan closings by opting for a construction-permanent loan. These loans require only one closing. Once construction is finished on a property and a certificate of occupancy is issued, the bank transfers the revolving line of credit construction loan into a conventional closed-end, fixed-interest mortgage loan.
  
  

Rate-Locking

• In some cases, lenders will let you lock in a rate at which you'll qualify for a future loan at a future date (usually no more than 60 days in the future). This eliminates the stressful period post-construction when you might be scrambling to find a refinance option. Make sure to speak with your lender at least 90 days before completion if you are interested in locking in a rate.
  
  

Payments

• Some customers avoid construction loans if they are wary of credit lines. It is recommended to opt for a construction loan because, during construction, payments on the mortgage will be lower--usually interest-only--thereby reducing your monthly outgo.