Finance
What is a 'construction loan' and how does it work for Hawaii new home building?
AA. A long-term mortgage used to purchase existing homes
BB. A short-term loan funding construction in draws as work progresses, typically converting to a permanent mortgage upon completion✓ Correct
CC. A government loan exclusively for first-time Hawaii home buyers
DD. A loan for purchasing vacant land before building
Explanation
Construction loans fund building projects by releasing draws (installments) as construction milestones are reached and verified by inspections. They are interest-only during construction (typically 6-18 months). Upon completion, a construction-to-permanent loan converts to a regular mortgage, or the borrower obtains permanent financing to pay off the construction loan.
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