5 Tips for Getting a Construction Loan Before You Build Your Dream House
Building a house is an exciting Construction Loan adventure. It allows you to personalize your home to suit your needs, your budget, and your lifestyle. But it shouldn’t surprise you that the costs can quickly mount up. Home loans and financing are available for those who don’t have the funds to pay for a new home.
When people first consider building a house instead of buying an existing home, they don’t realize the differences in loan types. It can actually be a bit more difficult.
You don’t have to feel overwhelmed by all the financing options for your Dream Home. These five Mortgage Tips were compiled by our team, which includes home builders professionals.
Plan
To get a lender to approve your purchase of land to build a new home, you must have a detailed plan. This allows the lender to see what you want to do with it.
How the property is planned will determine what type of loan you need. Sometimes it may take a while to start construction on your house. If this happens, you might need a Lot loan to purchase the property. A Construction Loan is available if you are ready for immediate construction.
Receive your Credit Card in Order
Lenders are more cautious with construction loans than they are with home loans, because you don’t have a finished structure to use for collateral.
While credit is not the only thing lenders will consider when approving your loan application, they will still examine it closely. Check your credit report for inaccuracies and make sure you pay off any outstanding debts.
Save as Much As Possible
Lenders are more likely to require a down payment for a construction loan than for a traditional mortgage. This is because it is more risky. It is important to save money for this and have enough cash left over to pay unexpected costs that may arise during the construction process.
Choose the type of Construction Loan
There are many types and options for construction loans. However, there are two most popular. A Construction-Only Loan, which is a short term loan that covers only the construction costs, is available. After your home is completed, you can apply for a mortgage to buy it.
The other type is a Construction-to-Permanent Loan, which converts your construction loan into a traditional mortgage once the home is built. This is a simpler option, requiring only one closing and all associated fees. However, higher interest rates can be possible.
Select the Right Builder
A loan can be approved if your project is perceived as less risky by lenders. You can make your loan approval easier by choosing a builder that has a solid reputation in the area for quality work and consistent service. Gallery Homes is an independently owned home building company with deep roots within the community. Since 2007, more than 500 homes have been built in Volusia County.