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Home construction loans are a specialized field. They differ from any other type of loans or financing. Some lending companies specialize only in construction loans. Lenders of this sort can be found across the country. Finding a lender, however, is not the complicated part of the process. A construction loan, though usually being a wearisome process, can be attained. Though getting a construction loan can be a tedious process, it is a must for new home construction. Before you start your major home remodel you need to spend a lot of time studying how you plan to use the new space. There needs to be careful and thoughtful planning about furniture placement, electrical outlets, and lighting. Depending on how big your plans are, you may need to think about upgrading your entire electrical system, and this could be costly. Also, if you are going to be adding features such as whirlpool tubs or additional baths, you might need to upgrade to a bigger hot water tank to supply you with your needs. Construction loans, being story loans, require the lender to know the story behind the planned construction before they will lend the money. Because of this, these loans are not standardized like many loans are underwritten to Fannie Mae or Freddie Mac guidelines. With that being said, there are usually some very common features of these loans. They usually require interest-only payments during the construction process and become due upon completion. Completion usually means that the house has gained its certificate of occupancy. Construction loans, usually being variable-rate loans, are most often priced at a spread to the prime rate or another short-term interest rate. The loan-taker, the contractor, and the lender establish a schedule based on the different stages of construction, and interest is charged on a figure based on the amount of money disbursed to date. Another important part in a construction loan is how much of the project cost the lender will be willing to lend. If the land is already owned by the loan-taker, then that can be considered equity on the loan. Many homeowners use construction-to-permanent financing programs. This is where the loan is converted to a mortgage loan after the certificate of occupancy is issued. This makes for only one application and one closing. Simplifying the process in this way is a great and a very effective, time-saving idea. All of these things should be discussed with a competent contractor. There are not many people who are capable of undertaking a major home remodel. A licensed and bonded contractor can help you make the most of your money and space. He can also give you tips on how to get the most out of your money. Contractors may cost a lot of money but, in the long run, a competent contractor can keep you from making some serious renovation mistakes.
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