It is interesting to have a home built for you, but the complexity and unfamiliarity mortgage loan for the new construction can dampen your enthusiasm. Learn the basics of home building loans and ready when you decide to build your own home.
There are two main types of home building loans:
Construction-to-permanent: you lend to pay for construction. When you move the loan balance, the lender to convert to a permanent mortgage. These are two loans in one. Stand-alone construction: your first loan to pay for construction. When you move, you get credit for paying the debts of construction. These are two separate loans.
You have only one closure with permanent development loans, which reduces the fees you pay.
During the construction phase, you only pay interest on the outstanding balance. The interest rate is variable during the construction, moving up or down with interest rates. If the Federal Reserve boosts short-term interest or decreases while the House was being built, the interest rate will change.
Creditors put the construction loan into a permanent mortgage once ended a home building contractor. A fixed mortgage is like any mortgage. You choose the fixed rate or adjustable interest rate loan and determine the loan term, usually 15 or 30 years. When finished, store and compare mortgage rates.
Many lenders let you close the maximum mortgage rates when the build started. Lenders generally require a minimum deposit of 20 percent of the amount expected a permanent mortgage. Some lenders make exceptions.
Stand-alone construction loans
Stand-alone construction loan can work out well if it allows you to make a small deposit. That can be a big advantage if you already have a home and do not have much money for a down payment but you will have more money when you sell your home. You live in your current home while Your next home is under construction.
This type of loan has its disadvantages, but:
You pay for the closure of two and two sets of costs-first of all, on construction loans; Second, on the permanent mortgage. You don't lock your mortgage rate to maximum. If the price goes up during construction, you may need to pay a higher than expected interest on the permanent loan.
And if your financial condition turned worse during construction, You find it difficult or impossible to qualify for a mortgage.
Qualifying for a loan development harder
When you apply for a loan to build a House, the lender does not have a full House as collateral, so qualifying for a loan may be more difficult. The lender will want details about the size of the home, the materials used and the contractor and the subcontractor that did the job. General contractors may contract all of this information.
On top of that, the lender needs to know that you are making your monthly loan payments during construction. If the lender thinks you don't have a current Rent or your mortgage payments while your home is being built, you will not be eligible.
If you believe you qualify, the mortgage rate comparison tool use.
Saving enough for unexpected expenses should be
The lender will make sure that you have the savings to pay for unexpected expenses. There is always the cost overruns when you build a House that you don't know about until you're in it. We don't want them to use every last penny they have before they start, "says Harma Henshaw, a former Eastside Division Manager for Federal Washington in Seattle.
Cost overruns have emerged when borrowers to change their minds about what they want as a result of development.
Carefully choose Your builder
An important aspect of building your home is choosing the right builder. Find one that has been building the kind of home you want in terms of price, style, and size. A look at the developer credentials with local home builder associations and ask for references from previous customers. Contact the Better Business Bureau to see if there are complaints against the builder.
Typically, your lender will look at the developer's credit status, financial situation, and licenses, as well as a track record, to build a similar home.
It is hoped the ongoing inspection during construction
Lenders will conduct routine inspections of homes built. During this period, the lender pays the builder in stages, called "interesting, " and typically send an inspector or appraiser to ensure that construction progresses as planned.