You want to build a new home and are looking for a loan to help you cover the construction costs. Construction loans can be obtained by either a home builder or a prospective owner and can put you on the road to the home of your dreams. However, there are a few details to consider first.
Construction Loan Basics
It can be difficult to obtain personal loans of this type without a previous banking history, since you do not have a finished home to put up as collateral. Once obtained, these loans include specific guidelines and monitoring to make sure the project is completed timely, so repayment can begin.
Construction loans are usually contracted for a year or less, and rates are often variable depending on the prime rate. Rates on these loans are frequently higher than those on permanent mortgage loans. The lender will need to review a construction timetable, along with detailed plans and budget, before approving the loan.
Once your loan is approved, you will need to follow a bank draft or draw schedule that follows the construction stages. During construction, it is common for only interest payments to be made. The lender will usually send someone to check on your job’s progress, to make sure it is on schedule.
Once your job is complete and contractors are fully paid, your loan liability will most often roll over into a mortgage in which you pay closing costs on.
Working out all of these details on your own can be a challenge. I have helped individuals and business owners alike obtain the loans they need. We can work together to determine equity, obtain your loan, and set a realistic construction timetable that allows for variable weather, material/ labor availability, etc.
Have questions? Give me a call! I’m more than happy to help you obtain the new construction loan you seek.