Home Buying in Elkridge>Question Details

Charle Levine, Home Buyer in Clarksville, MD

New Construction...Why would you get a Construction to Permanent Loan compared to an End loan?

Asked by Charle Levine, Clarksville, MD Thu Jun 7, 2012

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4
Hi Charlie - The Construction to Perm loan has many advantages to the buyer as well as the seller. I would disagree with the previous answer given that many upscale homes are built C2P.. The tax savings at closing are quite large given that the buyer is paying only the unimproved portion of the property. The other advantage is if the builder were to fail financially, you still own the lot and the improvements. If you had your heart set on that property and were using only an end loan, you only recourse to recovery is your deposit, which hopefully the builder either escrowed it and was bonded.

As for the double closing costs mentioned, a good agent would make sure that you were only being charged once for closing and a smaller fee to convert the construction loan in to a permanent loan. Furthermore, closing costs and down payments for C2P are reasonable for those with good credit.

As a Realtor for over 20 years and selling over 4000 homes, new and resale; I have never seen a Construction loan that my buyers didn't like. Make sure you are dealing directly with the bank that originates the C2P, a reputable builder and an educated Realtor. You won't go wrong.
0 votes Thank Flag Link Thu Jul 19, 2012
No I would not. This only benefits the builder, not you. If they don't have the financial capability to construct this house without dipping into your pocket I'd pass on that home! And I've seen some construction to perm loans set up to have YOU paying the closing costs twice.
0 votes Thank Flag Link Thu Jun 7, 2012
I believe they would rather you get that type of loan, but, not necessary. In our negotiations, they claim to be willing to pay all closing costs on the C to P loan, but, not necessarily all closing cost on an End loan. Would have to evaluate GFE, etc...Thoughts?
Flag Fri Jun 8, 2012
I wouldn’t.

And if your builder can’t get a construction loan they are not the right builder either Good luck,

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
Financing Kentucky One Home at a Time
0 votes Thank Flag Link Thu Jun 7, 2012
I believe they would rather you get that type of loan, but, not necessary. In our negotiations, they claim to be willing to pay all closing costs on the C to P loan, but, not necessarily all closing cost on an End loan. Would have to evaluate GFE, etc...Thoughts?
Flag Thu Jun 7, 2012
A lot of time it depends on the builder. Smaller builders typically don't want the carrying cost. One advantage of the constrcution to perm loan, you pay transfer tax on the land cost instead of the full cost of the built home.
0 votes Thank Flag Link Thu Jun 7, 2012
What are your thoughts about Columbia Builders?
Flag Fri Jun 8, 2012
Yes...I did realize that. I believe they would rather you get that type of loan, but, not necessary. In our negotiations, they claim to be willing to pay all closing costs on the C to P loan, but, not necessarily all closing cost on an End loan. Would have to evaluate GFE, etc...Thoughts?
Flag Thu Jun 7, 2012
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