Finding And Qualifying For A New Home Construction Loan

New home construction loans can also be known as “story” loans. This means before the lender is able to loan any funds, they must know the actual planned construction. Based on the fact that it is a story loan, it’s not going to be standardized as in the case with mortgage loans. Most construction loans require some type of payment during the construction process. These payments would be considered “interest-only” payment. They are not due until the end of the construction. In order for the bank to know the house is complete, a certificate of occupancy is shown.

Most new construction loans can come in the form of residential or commercial. With the real estate melt down, they are making it easier to obtain construction loans.

Home construction loans are usually considered variable rate loans. These loans are spread to the prime which is considered a short-term rate. The lender, you and the contractor will all draw a schedule based on the multiple stages of the building process. For new homeowners it is best to use programs that offer construction-to-permanent financing. This means that after the certificate of occupancy is issued, the loan is then converted to a mortgage loan from the initial construction loan. This can be seen as a good advantage since there is usually only one application at closing. Construction loans are not built to last long.

There is a possibility you can pay a higher rate on the construction loan if a construction-to-permanent loan will be used. Most people like this option when they are seeking or a better rate from the lender.

A rate-lock can also be purchased which is valued through the entire process of the construction. Just be prepared for the construction delays, as there are many with these types of agreements.

There are many resources that can be used to obtain a construction loan. To get the best loan, you should know exactly what your bank or lender is offering. Applicants can have a bigger advantage if they know more than their loan officer or advisor for purchasing construction loans. Staying a step ahead and investigating rates and terms will allow a better transition during and after the actual home construction. Online resources are available to obtain quotes and free consultation on which construction loan is best for your circumstances and personal request. Obtaining a construction loan for new homes does not have to be a hard task.