Finance
What is 'construction financing' and how does it differ from permanent mortgage financing in Pennsylvania?
AConstruction financing and permanent financing are identical products with different names
BConstruction financing is short-term lending disbursed in draws as construction progresses; permanent (take-out) financing replaces it upon project completion✓ Correct
CConstruction financing is only available from the Pennsylvania Housing Finance Agency
DConstruction financing is a federal program available only for HUD-qualified developments
Explanation
Construction loans are short-term (typically 6–18 months), interest-only during construction, with funds disbursed in draws as verified construction milestones are completed. Interest is charged only on drawn amounts. Upon completion, the construction loan is 'taken out' (replaced) by permanent mortgage financing. Pennsylvania homebuilders use construction-to-permanent (C2P) loans that automatically convert. Commercial developers arrange separate construction financing with a commitment for permanent financing from an institutional lender.
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