Cohousing-L Mailing List: Re: Construction Loans

[Katie Henry (katie-henry]

The construction loan is unrelated to the mortgage loans taken out by home 
buyers. As with any other real estate purchase, cohousing home buyers arrange 
for a mortgage with the lender of their choosing shortly before closing at 
current interest rates. There's no rate lock beyond what a buyer can negotiate 
with their lender, typically no more than a few months before closing. When the 
buyer closes on their home, the proceeds from the sale go towards paying off 
the construction loan.

Interest rates on construction loans do fluctuate with the market, so it would 
be possible for a large interest rate spike to affect home prices, but ideally 
there would be enough cushion in the budget to avoid this situation. Otherwise, 
increasing interest rates will not affect home prices, although they will 
obviously affect mortgage payments.

Katie Henry
Heartwood Commons - Tulsa

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I am curious how construction loans work with cohousing developments. Are
rates for the individual owners locked in before construction starts or
after they assume the loan for their individual unit upon occupancy. With
mortgage rates recently going up, how does that affect final home prices vs
initial estimates?