Unless you plan to pay cash for your home construction project, you’ll need to take out construction financing and a mortgage for the remaining balance upon completion. Even though you may have qualified for a mortgage before, getting a construction loan for your home construction project can be a little tricky.
Although it is certainly possible to obtain a construction loan as a building owner, lenders may shy away from you at first, thinking that you are not qualified to handle such an undertaking. Thus, it is important to be very prepared and show yourself in an able and competent light when presenting your case to the lender. For example, don’t say, “I’ve never done this before, but I’m willing to give it a shot.” Instead, be positive, prepared, and professional. Never lie, but anticipate questions and concerns and be ready for answers.
There are several types of construction loans to choose from, but one of the most popular types of construction loans for people building their own home is a construction loan that turns into a permanent loan once the house is completed. Although there is no standard specification for this type of loan, as a guideline, most require you to pay closing costs only once. This saves some money and makes the process easier. You do not have to go through the qualification process twice. The downside is that it’s almost impossible to lock in a permanent mortgage rate, because you won’t be closing the loan for six months to one year.
No matter what type of construction loan you choose, you will likely be required to pay monthly interest on the construction loan amount during the construction phase. The amount you owe each month depends on how much you “drew” from the loan, not the total amount you are allowed to borrow. If you are approved for a construction loan of $100,000 but you only withdraw $50,000, your interest payments will be based on $50,000. Construction loans are usually standard (non-amortising) interest and are one or two percent over the principal rate, or whatever you negotiated with your lender.
Building qualification exceeds the income and credit qualification requirements of a standard mortgage loan. Bankers or lenders will want to know how you plan to handle your project and that you are able to build a home yourself. A comprehensive bank presentation would be in order. Here is an outline of what you will need to apply for a construction loan:
- All the same financial information you would provide for a standard mortgage loan (financial statements, income check, credit report, etc.)
- A collection of your plans (they may ask for several copies)
- Detailed specifications (the materials and finishes you plan to use)
- Cost estimate
- Appraisal (ordered by the lending institution. The appraiser will use plans, specifications, and lot value to determine the amount)
- Your lot information (whether you own it, etc.)
- Contractor offers (not necessarily required, but may be if this is your first project)
You may also consider submitting any other documentation you can think of that will help determine your ability and willingness to complete your project. The bank essentially becomes a silent partner in your project and will worry about the house being built right. Demonstrating your ability to handle the project is key here.
64 thoughts on “Getting a Construction Loan Vs A Mortgage Loan – Learn the Differences”
medrol tablet cost of medrol medrol for sale
zoloft without script
dapoxetine 30 mg tablet price in india dapoxetine buy us where can i buy dapoxetine in usa
My pharmacist gave me information about lisinopril medicine.
where can i buy hydrochlorothiazide hydrochlorothiazide 12.5 mg price generic zestoretic
When I feel a headache coming on from water retention, Lasix brand name is my go-to.
amoxil medication online amoxil 250 cost amoxil pharmacy
I’m desperate to purchase Accutane, but don’t know how.
flomax generic alternative
amitriptyline buy online amitriptyline brand name amitriptyline 25 mg price in india
suhagra 100 for sale buy suhagra 50 online suhagra without prescription
order chloroquine online
how much is the viagra pill
robaxin over the counter canada
where can i buy zithromax over the counter
cheap clonidine online
accutane cost canada
how much is cymbalta cost
clonidine 0.1 mg rx
viagra 100 coupon
cheap tadalafil 5mg
acyclovir tablets over the counter
where can i buy tetracycline over the counter
synthroid 250 mcg
baclofen 5 mg 1mg
chloroquine order online
plaquenil 150 mg
lasix 12.5 mg
prozac brand coupon
buy lipitor 10 mg
synthroid 125 mg price
vermox for sale
levitra purchase cheap
generic for cleocin
prednisone 20 mg price india
tizanidine brand name
online pharmacy price checker
amoxicillin 500 mg where to buy
where to get zithromax over the counter
amoxicillin price south africa
amoxicillin 500mg price in canada
retino 0.25 cream price
cost of strattera generic
where to buy viagra online safely
citalopram 10mg buy
amoxicillin pill 500 mg
lisinopril 49 mg
buy synthroid canada
how much is tizanidine 4mg
azithromycin 250 price
cost generic augmentin
metformin singapore pharmacy