Construction to Permanent Home Financing

Understanding the Key Differences in Construction Loans vs. Construction-to- Permanent Home Mortgages

Contstruction-to-Mortgage Loans

• Bundles both construction loan and permanent mortgage loan together.
• Once the construction of the home is completed, the construction loan is converted into a separate mortgage loan with the new home as collateral.
• Borrowers only borrow what they need and pay interest on that amount.
• Closing costs are paid only once.
• Borrowers must plan to live in the home and hire an external contractor.
• Offering two terms for construction: 9 or 12 months.
• Requires a final inspection to check if the home is complete and follows building codes.
• Requires a credit score of 700 or higher.
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Regular Construction Loan

• Typically, higher interest rates since the house being built can't be used as collateral.
• Good credit score, low debt-to-income ratio, and sufficient income required for approval.
• Down payment may be as little as 10% with PMI.
• Documentation required about the project, including sales agreements, plans, budgets, and contracts with builders and contractors.
• Close collaboration with the lender who may have specific application requirements.
• Lender approval needed for professionals involved in the project, such as architects and contractors.
• Application process starts when you already own the land or have a purchase agreement for the land.
• Detailed plan and budget must be in place prior to loan approval.
• Loan disbursements are released in agreed-upon amounts as the work progresses.
• Disbursements correspond to milestones in the construction project, such as completion of the foundation, roofing, or siding.

Why Borrow From Orrstown Bank?

As a locally owned and operated bank based out of Shippensburg, PA, Orrstown is a leading lender for mortgages and construction loans in MD, PA and beyond. In our 100-plus years of operation in the area, we've proudly supported our community with transparent services from a team of friendly faces.

Construction to permanent mortgage loans are an excellent choice to finance your home and its construction. For more information on our financing rates, terms or other loan services, complete the form on this page or contact an Orrstown Bank mortgage officer today!

Important Notice: Interest rates and maximum loan-to-value may be based on credit score, property type, occupancy, purpose, investor, insurer, loan-to-value and other factors. Additional investor, insurer and Orrstown Bank criteria/conditions apply to all products. Information provided is for illustrative general use only and does not contain all qualification and automated underwriting approval requirements. Orrstown Bank reserves the right to change this information at any time. Meeting any of the criteria does not constitute a commitment to lend.