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$1 million dollar construction loan in PA for 3.5-3.625

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  • $1 million dollar construction loan in PA for 3.5-3.625


    My wife and I are planning on building our dream house. One of the local banks quoted us 3.5-3.625 30 year construction to permanent loan. We were planning on putting 20% as down payment. We both have excellent credit 780+, no debt (no student loans, no practice debt, no mortgage, no auto loan), and a good cash reserve. Does this seem right?


  • #2
    I'm not in the market for loans right now so I have no idea what the current rates are, but it looks about right to me. On average though, back when I got a construction loan, I remember it being about 0.25-0.5% higher then a conventional mortgage. You can refinance once the home is built if you have enough equity based upon an appraisal of the house to get a lower rate if you want to. A construction loan represents a higher risk for the bank because they don't know what the resale value of your home will be. If you think that rates are going to be about the same, you may want to get the cheapest loan possible with plans on refinancing once the home is built. You should factor the cost of refinancing into your build cost though, and definitely try to make sure that you are building a place that will appraise so that you will have at least 20% equity invested into the home (ie don't spend 1 million building a 2 bedroom/1 bath home when all the comparables are selling for 500K). You can balloon out your build price pretty easily if you pick out all the highest end features.


    • #3
      What did you end up doing?