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The Basics of Construction Loans in NC: How to Get the Funding You Need for Your Project

If you're planning to build a new home or undertake a major renovation project in North Carolina, you're probably wondering how to finance it. One option to consider is a construction loan. This loan is designed to provide the funds you need to build a new home from scratch or to make significant improvements to your existing property.

What is a Construction Loan?

A construction loan is a type of loan that provides funding for building or renovating a property. Unlike a traditional mortgage, which is designed to help you buy an existing home, construction loans are designed to cover the costs of building a new home from the ground up or making major improvements to an existing property. These loans are typically short-term (12 to 18 months) and provide the funds you need to pay for materials and labor.

Types of Construction Loans in NC

In North Carolina, there are two main types of construction loans to choose from:

  1. A one-time close construction loan
  2. A two-time close construction loan

A one-time close construction loan is a loan that covers both the construction phase and the permanent mortgage on the completed home. With this type of loan, you'll only have to close once, and the funds are disbursed as needed during the construction process. Once construction is complete, the loan is converted to a permanent mortgage.

A two-time close construction loan, on the other hand, involves two separate closings. The first is for the construction loan, which covers the costs of building the home. Once construction is complete, the loan is closed again, and the funds are used to pay off the construction loan and convert it to a permanent mortgage.

How to Qualify for a Construction Loan in NC

To qualify for a construction loan in North Carolina, you'll need to meet certain requirements. These include:

In addition, you'll need to provide documentation such as tax returns, bank statements, and proof of income to demonstrate that you can afford the loan. You'll also need to work with a builder who has experience with construction loans and can help you navigate the process.

The Benefits of a Construction Loan in NC

There are several benefits to consider when it comes to taking out a construction loan in North Carolina. These include:

Final Thoughts

Construction loans can provide the funding you need to build your dream home or make major renovations to your existing property. If you're considering a construction loan in North Carolina, be sure to do your research, work with an experienced builder, and make sure you can meet the loan requirements to qualify for the funding you need.

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