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Construction to Permanent Loan Rates

Construction to Permanent (also known as “CTP”) Loan Rates can differ slightly from traditional home loan rates.  Before getting into why CTP rates can differ~ let’s take a look at the different type of scenarios in which you could utilize a “CTP” loan:
  1. Build a home on a lot you own.  You could own a lot outright or be tearing down a home you own outright.
  2. Build a home with the purchase of a lot.  You could either be buying a lot from a builder who will be building your new home, buying a lot from a private seller, or buying a home in which you plan to tear down and build a new house.
  3. Build a home with a lien payoff.  This is a technically a refinance mortgage combined with a CTP.  You could own a lot with a lien or own a home with a lien.  In both scenarios you would incorporate the existing lien in the new CTP loan~ making the loan a CTP refinance.
When it comes to CTP loan rates most lenders will tell you before they can lock a rate, you need to have the following information:
  1. Plans, specifications, and design.  Your builder will provide you with the plans and specifications of your new build.  The “plans and specs” should be as detailed as possible.  The design will come from and architect or designer you hired prior to meeting with the builder.
  2. Contract between you and the Builder.  Before a lender can move forward with the loan (lock the rate and order the appraisal) you need to have a signed, executed contract, between you and the Builder.
When locking a CTP Rate~ there is a timeframe on how long the rate is good for.  They are usually good for 60 days.  If you do NOT have plans, specs, design, and contract between you and your builder you could be looking at delays in the mortgage process.  Delays could ultimately cost you more money down the road. As most rate lock extensions are costly and are the responsibility of the borrower.

CTP Loan Rates are typically a little higher than a traditional mortgage.  The reason:  the lender is lending money on a house that does not exist.  That means there is higher risk on the lenders part.  More risk equates to higher rates.  For example:  on a traditional mortgage a lender may quote you a rate of 3% for a 30 year fixed.  On a CTP Loan that same lender will quote you a rate of 3.25%.
There are a lot of moving piece when it comes to CTP Loans.  The key to a seamless build is putting together a dream team. At Build Butler we have put together a team of trusted professionals to help you along the way.