Building A Property With A New Construction Loan
Are you interested in becoming a homeowner, but have not quite found your perfect home on the real estate market and interested in building your own home that best suits your needs, or, are you someone who currently builds homes? If these situations apply to you, a new construction loan might be able to assist you in financing a real estate project. If you are located in the areas of Stamford, Norwalk, or Fairfield, Connecticut, and want to learn more about your home financing options, Prosper First Funding Corporation is here to help. Read on to learn more about building a home with a construction loan.
How Does A Construction Loan Work?
A new construction loan, also sometimes referred to as a self build loan, offers a borrower funding for construction of a new residence. They are particularly helpful for individuals or investors that are looking to build a new property or a home tailored specifically to fit their needs. Construction loans will cover the building cost of the project, and when the construction of the home is completed, the borrower has the option to apply for a new loan to help repay the construction loan, or they can refinance the construction loan into a new mortgage. Lenders are generally more involved in the construction loan process than they are with a traditional loan because most construction loans cost both the price of the home’s construction, as well as the price of the property. It is important to remember that a borrower will be required to provide plans for home’s construction and include a schedule of the time frame it will take to build and a budget when they apply for a construction loan. When the building has been completed, the loan repayment will begin, and in certain cases, you may only need to make interest payments on the construction loan during the time the home is being built.
Advantages Of Obtaining A Construction Loan
Although construction loans tend to be considered riskier than a traditional loan, and have higher interest rates, they still offer several benefits. They have flexible terms and can be transferred to a new mortgage. Another advantage is that construction loan payments are not required to be repaid until the construction of the home has been completed. Additionally, these loans allow for the borrower to design the home to fit their unique needs and match their home preferences.
Qualifying For A Construction Loan
Construction loans eligibility requirements tend to be stricter than a standard loan. Some typical construction loan requirements include:
- A minimum credit score of 680
- Most lenders will require a down payment amount of 20% to 25%
- A borrower must submit a thoroughly organized building plan and provide essential details, such as who will be building the home, the type of materials that will be used to construct it, and the size of the home
If you are interested in using a construction loan to finance a real estate project in Stamford, Norwalk, or Fairfield, Connecticut, contact Prosper First Funding Corporation today for a consultation.