Construction Loans: Q&A with Ohio Valley Bank

One of our most frequently asked questions is about financing a modular home build. Typically, building a modular home requires a construction loan. While much of the process will depend on your lender’s policies, we asked Ohio Valley Bank Assistant Vice President Joe J. Wyant some questions about their process that might be of interest to you.

D&W HOMES: What are the main differences between a construction loan and a mortgage loan?

WYANT: The main difference between a construction loan and a mortgage loan is that on a construction loan you only have to pay interest on the amount that you make draws on for the first six months of the construction loan.  After that initial six months of a construction loan, then you start paying principal and interest payments.  On a regular mortgage you start principal and interest payments 30 days after the loan closes.

D&W HOMES: Once the build is completed, how does the construction loan transfer into a mortgage?

WYANT:  At Ohio Valley Bank we only have one closing.  After the first six months of interest payments then principal and interest payments automatically start.

D&W HOMES: Is it more difficult for people to get approved for a construction loan than a mortgage loan?

WYANT: The same requirements apply for both a mortgage loan and a construction loan.

D&W HOMES: Typically, what credit score range is needed for a construction loan?

WYANT:  I can’t say you have to have a specific credit score to be approved for either a mortgage loan or construction loan.  However, the interest rate you would get is based on your credit score.  To get our best rate you have to have a credit score above 700.

D&W HOMES: If someone wants to package land and their construction loan together, can they do that? How does that work?

WYANT: Yes, you can have a package of land and the construction loan.  However, we can only loan 80% of the appraised value of the land and home.  So you may have to have a down payment of the 20%.

D&W HOMES: Is there anything else you would like to add?

WYANT: On a construction loan you have your typical closing costs and we charge an additional $1,000.00 for the construction loan. With each inspection from the appraiser there would be an additional charge from the appraiser ranging from $100 to $125 for each inspection. Typically for a modular home you would have two inspections. One when the home is set on the foundation and the final when the house is complete.

For more information about the services offered by Ohio Valley Bank, visit their website.

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