If you are interested in having a home
built, you will probably need a "Construction Loan:",
assuming you already own the property on which you want to build.
Owning the land will provide some or all of the equity needed
for the construction loans. However, this type of loan is not
easiest to find. Since the great recession construction loans
are harder to find. Specialist lenders, credit unions and regional
bank transitionally do this type of loan. These loans are short
term, usually don't exceed a year to complete the project, and
the rates are higher than a standard home purchase loan. These
loans are usually adjustable and interest only. This allows smaller
payments to be made on the construction loan until the house
is complete and is either payoff with a "Bridge Loan"
or converted into a conventional 30 year mortgage once the Certificate
of Occupancy issue.
The borrower will need to have your ducks in a row to gain an
approval. He or she need to provide detailed plans, a realistic
estimate of costs, and a timetable for completion. Assuming,
the borrower gets an approval for the loan, it will be based
solely on good credit, and a complete construction package or
loan story. An account will be set up with a "draw"
so that money is paid out as each stage of the construction is
completed. For example the foundation completed, before the money
for the framing will be released, and so forth until entire house
it is completed. The lender will send someone to inspect each
stage of completion and sign off at each stage of construction
and for the last payment to be made when a Certificate of Occupancy
is issued by the city or county''s building department. The contractor
will release any mechanics liens and the contractor will receive
the final payment by the lender. As mentioned above the borrower
will have to pay the off the construction loan balloon payment,
with a "bridge loan" and try to find a 30 year mortgage,
or the original loan could be a "Construction-to-Permanent
Mortgage", where the construction loan automatically converts
into a 30 year conventional home mortgage by the original lender.
There are lenders who will provide funding for the lot, construction
and the permanent financing through both conventional lenders,
VA or USDA programs. Other lenders specialize in vacant land,
farms and ranches, and the Section 184 Indian Home Loan Programs,
which may provide ground-up to permanent financing as well. You
might want to check out Niche Loans from the main menu at top
of page or click here.
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latter assited us in lowering our mortgage payment. He is an
expert, honest, trustworthy, and meticulous in securing purchase
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and Eugenia L., San Pablo, CA