Have you decided on building your own home instead of buying an existing one? If so, it might come as a surprise to you that you will not get a traditional mortgage. Alternatively, you will usually get a construction loan.
As such, we have put together everything you should know about construction loans.
What are construction loans?
Construction loans are those shorter-term loans with higher interest used to cover the rehabilitating or building of a house. Compared to traditional home loans, construction loans are based on your home’s projected value once all of the work is good.
There are three types of construction loans. These include:
These are the loans that are good if you have definite timelines and construction plans in place. With this type of loan, the bank will pay the builder while completing the house. Afterward, the cost converts into a mortgage at closing. This loan type lets you lock interest rates at closing making steady payments.
On the other hand, construction-only loans are those who should be fully paid once you nearly finish your house or building. If you have a lot of spare cash, this is a great choice. As such, … Readmore