Construction-to-Permanent Loans Explained

Jun 05, 2020

It’s hard to find everything you want in a home. If you’re looking for a house that’s perfectly catered to your family’s needs, then you may want to consider building versus buying a home. WaFd Bank’s all-in-one loan, also called a custom construction loan or construction-to-permanent loan, will help you build your dream home that’s the right fit for you.

Learn how all-in-one loan provides you with the money to build your house and your permanent mortgage financing — all rolled up into one loan.

How Does a Construction-to-Permanent Loan Work?

If you’ve found the right lot to build your dream home, then it’s time to consider how to pay for the construction. For that, you’ll likely need a building loan to pay your builders and contractors. However, you’ll also need permanent financing after your dream home is completed. Often, banks provide money for these two phases (the construction and the permanent financing) via two separate loans. WaFd Bank’s construction-to-permanent loan uses one loan to build your new custom home.

What is the Construction-to-Permanent Loan Offering, or All-in-One Loan, From WaFd Bank?

After you’ve purchased your lot, WaFd Bank’s All-in-One loan is one loan to cover both the building of your house and your mortgage after you move into your new home. There’s just one application process, one set of fees and one interest rate at the start of construction of your home through the completion of your home AND for the life of your loan. That means less paperwork for you to keep track of and only one payment amount until your house is paid off. Plus, at WaFd Bank we don’t sell our loans, so you’ll always know where to go if you have questions.

How WaFd Bank is a Unique Lender for Construction-to-Permanent Loans

Many banks who offer construction financing do so in two steps. The first loan covers construction only. After construction, you will need a second, permanent mortgage loan which will require two closings and two sets of fees. If these lenders do not offer one interest rate at the start of construction through the completion of your home and after you have moved in, you may need to plan for fluctuations in interest rates. Mortgage rates may increase before your home is finished; putting pressure on your ability to afford your payments once your home is complete. You might also have to deal with a second application process and even a second appraisal at the completion of your home if the lender sells their loans.  

Benefits of a Custom All-in-One Construction Loan

With WaFd Bank’s All-in-One Construction Loan, you’ll only need one application, one closing and one set of fees.  The entire project is underwritten before you start construction. And you will be locking in your permanent rate before you even break ground, giving you additional peace of mind. We even give you the option to lock in your interest rate during processing of your loan application for up to 90 days.

When you start construction, we allow 12 months for interest-only payments on the funds you have drawn to date as your home is being built. Your monthly payments during construction are based on the funds used as your construction progresses (called “monthly draws”) from your total loan amount based on the percentage of completion. Your local neighborhood branch manager will help you with your initial loan application, work with you and your builder, oversee the monthly draws and work side by side with you all the way through the completion of your new home.  

Is the Combined Construction Loan and Mortgage Right for You?

We know building a custom home may be one of the biggest financial decisions you’ll ever make. Since 1917, WaFd Bank has been helping our community by making loans to families who wish to build or buy homes. Today, custom construction financing is a significant part of our business. We understand our clients are not just clients, they are our neighbors.

Contact your local dedicated WaFd Bank branch manager to meet with you one-on-one and learn more about our all-in-one construction loan. We don’t pay on commission, so we’re free to give you the personal attention and customized advice you deserve.

Learn more about WaFd Bank’s construction financing, read our free Custom Construction Ebook, contact your local branch or apply for a loan online.