Retirement & Financial Planning Report

If you’re planning on building a home, consider taking out a “construction-to-permanent” loan. These arrangements start out as construction loans and automatically convert to permanent mortgages when the house is completed.

Because buyers generally can obtain such financing cheaper than builders can, your house might be built for less money. Moreover, if only one closing is involved, there will be only one set of settlement costs.

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The catch? Once the process has begun, it’s irreversible. With conventional mortgage financing, if you suffer a financial setback (or just change your mind), you can back out of the deal and lose no more than the deposit you gave the builder.

On the other hand, with a construction-to-permanent loan you’re committed to finish the transaction. Therefore, you should be positive you want the house and you should be sure the builder will live up to his promises. Ask your builder for references and check them out thoroughly.