Five New Construction Loan Tips to Consider Before You Build Your Dream Home
Building a home can be an exciting experience. You have the ability to customize your home according to your family’s lifestyle, budget, and needs. It should not surprise that building a home can be costly. Many people don’t have enough money to pay for new homes outright. This is where home loans or financing comes in.
Many people don’t realize that loan types for building a home are different from traditional mortgages. The process can be more complex than you might think.
Do not be overwhelmed by the many financing options available for building your Dream Home. These 5 Mortgage Tips have been compiled by our team of experts in home building to make your experience easier.
Make a plan
A detailed plan of the property is required in order to get a loan approval for land purchase for new homes. This will allow the lender to know what you are planning to do with the property and when.
The type of loan you require will depend on the plan that you have for your property. You may need to wait a while before construction can start on your home. In this case, you will likely need a Lot Loan in order to purchase the land. If you’re ready to start building immediately, you can apply for a Construction Loan.
Place Your Order to Get Your Credit
Because there is no structure to use as collateral, construction loans can be more risky than home loans.
Lenders will not only look at your credit history to decide if they approve you for a loan. However, they will examine it carefully. You should therefore check your credit reports and pay down any existing debts.
As much as you can
A construction loan is more risky than a traditional mortgage. Lenders may require a minimum 20% down payment. This down payment should be saved and you should also have some money left to cover any unexpected building expenses that might arise during construction.
Select the type of construction loan you want
There are many types of construction loans, but these are the most popular. A Construction-Only loan is a short-term loan which only covers construction costs. To purchase your home, you will need a mortgage.
The other type is a Construction-to-Permanent Loan, which converts your construction loan into a traditional mortgage once the home is built. This option is simpler and requires only one closing. However, you should be aware that it may result in higher interest rates.
Choose the right Builder
Your loan approval can be facilitated by any information that makes your project less risky to lenders. A builder who has a good reputation for quality, consistent work is a plus. Gallery Homes is a privately owned home-building company that has deep roots in the community. Since 2007, we have built over 500 homes in Volusia County. We look forward to hearing your ideas for your dream home.
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