During the construction period, the interest rate may be variable. The lender and the Borrower must enter into an agreement that:
- documents the range in which the interest rate may float during construction;
- documents the point of interest rate lock-in;
- specifies that the permanent mortgage will not exceed a specific maximum interest rate; and
- permits the Borrower to lock in at a lower rate, if available and they have not already locked in a rate.
For additional information see Handbook 4000.1 II.A.8.j.vi. available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh