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Old 11-13-2011, 06:44 AM
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Join Date: Apr 2007
Location: Atlanta, Ga
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Construction loans are at higher rates and are generally short term notes (12 months) that the bank will hold and not resell. They are loaning you "house money". The rate is generally higher and there is more work for the bank than a conventional mortgage. When you receive a construction loan for example of $500,000, the bank does not write you a $500,000 check at closing. You submit draws based on work completed. The bank will come an inspect to make sure all work is in place and then release your draw. Most construction notes have a fixed time period like 12 months and then you need to find permanent financing. This will be your standard 15-30 year fixed mortgage with a lower rate.

I am not a mortgage guy but I have taken out quite a few construction loans and this is how it works in GA. Of course we also have the highest bank failure rate so what do we know.