Construction & Lot Loans
Building a new home or completing extensive remodeling
What You Should Know
A lot loan allows you to start paying on land before you start construction. Once you're ready to build, your lot loan can become a construction loan.
- If you own the land, you may be able to use your lot as equity for your construction loan.
- Construction loans are typically set up as a 6‐12 month adjustable rate mortgage (ARM) during the construction period providing you with initially lower interest rates and lower monthly payments than a traditional fixed rate mortgage.
- Interest‐only loan payments are made during the construction period.
- A third‐party escrow account will be used to hold the construction funds to pay your builder. These funds are typically held with a title insurance company.
- Your builder will make four to five draws from the escrow account during the building process. A draw is a portion of the total cost owed to the builder at certain stages of the construction.
- A title company will act as the disbursing agent to pay your builder. They work directly with Johnson Bank and your builder to ensure proper inspections, timely payments and a clear title is maintained.
Construction‐to‐permanent mortgage financing
- After your home construction is complete, our program allows you to make a decision on permanent mortgage financing.
- You can choose whether to remain in your adjustable rate mortgage and begin making principal and interest payments, or if eligible, convert your construction loan to a longer term fixed rate loan.
Some lenders may require a second closing with additional closing costs. Our unique one‐time close will help you save time and money. You can enjoy the convenience of one loan, one application and one closing date.
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