New Home Construction Loans
The decision to build a house comes after a long analysis of the sources of funds to facilitate the process. Luckily, there are a lot of lending companies that offer loans targeted at new home construction. New home construction loansand stated income construction loans are the two types of loans that are offered to people in the process of constructing a new home. Both types of loans offer funding for new home construction, but the difference lies in the way in which they can be obtained.
The first and very crucial step in obtaining a home construction:
Choosing a construction loan click here. New home construction loans are offered by all major national lenders and can also be obtained from regional banks or mortgage companies. The important point to note is that the construction lender must be kept informed of anything and everything that has been planned about the home construction.
New construction loans themselves are of two types.
The first type is known as the construction/perm, in which the loan is automatically converted to a regular mortgage on completion of the construction of the home.
The second type is the construction-only loan, which as the name suggests covers only the construction costs of the home. This type of loan is due as soon as the construction is done and must either be paid off or replaced by a mortgage.
Disbursement of construction funds.
Lenders have very specific ways of paying for the construction of the home. The payment of funds is divided in to several “draws”. The home-owner must draw up a plan at each stage of the building process clearly stating how much funding was used at that particular stage of construction. For example, a draw can be done after the pouring of the foundation of the home, or maybe during the framing of the home. This drawn up plan is then sent to the lender, who examines it and allocates the funds to be paid.
Typically, the interest for a new construction loan is paid over a period of 12 months, and then replaced by a permanent mortgage, once the home’s construction has been completed.