Tips & Advice On Residential
Construction Loans
By Bob Hett
A lot of people dream about building a new
home. Everyone wants a home that will work
with their lifestyle and reflect their
character and be original and attractive to
the eye. Getting a construction home loan
can be a scary task. Residential
construction loans are different from
traditional home mortgages in many ways.
There are several types of residential
construction loans to choose from. If you
choose the owner builder loan, this means
you are acting as the general contractor and
you are solely responsible for the
construction getting completed on time and
within budget. A custom contractor loan has
the contractor being responsible for making
sure that the construction gets done. An addition loan is for when you
love your home and your neighborhood and
don't want to move but need more space. This
loan takes into account how much the house
will be worth after the addition.
There is also a tract or subdivision loan,
which is the kind of loan you will need if
you decide to build a house in a
subdivision, choosing from the builder's
standard house plans and adding any upgrades
you want.
When you think about building a home, you
have to figure out how much it is going to
cost you. You take the cost of the building
site, (keeping in mind that this includes
both the asking price of the site and the
costs to develop it), your home design, the
construction costs (this must include quotes
for all the subcontractors who will be
working on your house, for example, masonry,
electrical, landscaping, etc.) and the costs
of financing, which will give you the total
cost of building a new home.
It is always a good idea to pre-qualify
for a construction loan. The process to
pre-qualify takes into consideration your
credit record, any down payment you can
make, the type of loan you want, and the
current market value of homes. If you
pre-qualify, you will know up front the
amount of home you can afford to finance and
build.
Not all residential construction loans
are alike. Many are based on a six-month or
one year plan, which means they will be
completed within that time frame. Some allow
you to lock in your interest rate at the
lowest rate, and others are variable
interest rate loans, which means the
interest rate changes with the market. Other
loans are bridge loans, which allow you to
use equity from your current home until your
new one is finished. Many require interest
only payments until the house is completed;
at which point those payments are due. The
best choice is to get a construction loan
that can be converted into a mortgage loan
so that you only have to fill out one
application and have the costs associated
with one closing instead of two.
Building a new home does not have to be
scary if you do your homework, plan well,
and realize that not everything will go
according to the plan.
Bob Hett offers great tips
and advice regarding all aspects of the loan
industry. Get the information you are
seeking now by visiting
http://www.loanscentral.info
