A home construction loan offers flexible finance options that fit the needs of nearly any borrower. Lenders are able to design loans to cover construction, a finished home, or a combination of the two. Borrowers should shop around to find the best rates and terms for the project at hand.
HOME BUYERS
Purchasers tend to seek traditional home mortgages from lenders when buying directly from the builder. A traditional mortgage uses the equity of the home and property as a guarantee of the loan.
The buyer has the option to obtain a construction home loan for the construction period. The time allotted for construction is generally six months to one year. The buyer will then be required to obtain a standard home mortgage. This option can leave a buyer scrambling to find two different lenders. The interest rates might vary greatly and the added costs of two closings should be considered.
Another option is to seek out a combination loan. Once the construction is complete, the loan becomes the permanent mortgage. This method is straight forward, yet takes away the flexibility of shopping around for better rates. It is best to get quotes for both options before making a final decision.
BUILDERS
Home builders and neighborhood developers are in the business to make and sell homes. They are able to secure loans to cover most construction costs. Although lenders will loan up to ninety percent of new construction costs, builders and developers are required to add the remaining costs as an investment to the project. It is a proven way to help ensure loan repayment.
RISK MANAGEMENT
These types of loans are monitored closely to help guarantee a positive outcome. Draws on the funds are allowed on an as-needed basis to pay contractors and purchase building materials. Many lenders will require paperwork to verify purchase and service needs, but others will allow withdrawals of funds online. The building sites are subject to periodic inspection to assess progress.
Some tried and true methods employed to reduce project failure risks are environmental and soil inspection, quality appraisals of building material and strict adherence to building codes. Prompt and proper payment of workers and contractors avoids the legal hassles of liens.
There is a home construction loan that can conform to the needs of most home buyers and builders. Keeping the project needs and budget in mind when checking out the various options will guarantee a finished and affordable new home for all.
Pop over to the Real Estate Scoop for more information on Foreclosure Services.
Read More From Kenn Fong
|
