Yes they are available. We are owner builders. We went through a local bank. The first local bank we went to was stupid. This second bank that we ended up going with gave us a good rate, is fair with the draw procedures and is also willing to convert our construction loan to a mortgage when we are done building. Look into a smaller bank that is not part of a national chain or maybe a credit union. Good luck.

I'm no expert but based on the fact that mortgage rates are currently at near historic lows and the government is pumping billions of dollars of new money into the economy (all those stimulus package bailouts), I think we're going to start seeing inflation VERY soon - double digit inflation in fact. If so, mortgage loan rates will rise with inflation. My personal suspicion is that your banker also foresees inflation coming and he doesn't want you to lock in today's low rates by getting a one-time close loan because such loans are very tough on the lenders. Your banker may look for the "best rate" available for you when your construction is done, but I strongly suspect that "best rate" won't be nearly as good as what you can lock in right now with a one-time close. Keep in mind that your loan is a business transaction for the bank. The bank wants to make money off of it and your banker has the bank's best interests at heart, not yours. As for possible over-runs in costs, if you're doing a "fixed price build", the only cost over-runs should be from "change orders" and I highly recommend paying for any and all change orders "out of pocket." That is one sure-fired way to keep yourself from going overboard on changes. LOL!

We faced a similiar decision and ultimately chose a 2 time close. The single close loan was locked at 4.5 for 30 years, no option to float down and closing fees that were approximately 4% of the loan balance. We are building at an adjustable rate that starts at 4.2%, paid 1.5% of the loan amount for closing (basically just a 1% origination fee + assorted bank charges) and will get a discount on the 2nd close if we use the same bank for the permanent mortgage. I do have a healthy fear of what the final appraisal will be and the possibility of having to being cash to the table to close but we thought it was worth the risk to lock in a lower rate for the final mortgage, which should be around 3.5%.

Hi Val, A) If you did a "one close" construction-to-perm combo, then you'll have no further scrutiny, B) If NOT, then I still wouldn't worry too much... that "contingency money" is required EXACTLY for the reasons you found you needed it ;~) That's the plan! Sounds like you ought to be fine! Dave Donhoff Just some mortgage guy ;~)