Getting A Mortgage When Building A Home
You Need A Construction Loan
You will need to qualify for and get what is known as a construction loan. This type of loan differs from a conventional loan in that it is issued from a bank and not a mortgage company. These are also shorter term and will eventually be converted into a permanent mortgage once the home is built. This method is called a construction-to-permanent loan.
Get Pre-Approved & Apply For A Mortgage
After you have applied for a construction loan, you can then apply for a mortgage. This will depend on who you get your construction loan from because while some lenders will roll your construction loan and mortgage together into a construction-to-permanent loan. Contact A1 for more information on this process.
Having great credit and following the standard mortgage criteria is a good place to start.
Chose A Builder With Good Credentials
Finding the right builder is an essential step in this process. Do your research before signing any documents. Go over your budget and building plan in the very beginning. Stick to your budget and make sure you look over your contract carefully; you don’t want any surprises as you are wrapping up the construction process.
Have Completed Construction Documents
Before you can even think of applying for a construction loan and mortgage, you will need to have a specific building plan, construction contract, and cost estimate. The bank will go over these documents to make sure that you have a solid plan that will stick with the budget and timetable.
Stick To Your Budget
Like with any home loan and mortgage, you will need to set and stick to a realistic budget that won’t break the bank. Getting pre-approved is important so you can see your budget and not go over it. It will help you keep your dream home in perspective and not get you into financial trouble.
As with a pre-built home, you will need to save up your money for at least a 20% down payment and other costs. However, since new construction is considered higher risk, these costs (including interest) tend to be higher. This helps ensure that you won’t walk out on the project, leaving lenders and other parties involved in the lurch.
Building your dream home can be incredibly rewarding as you can design the perfect home for your family and your lifestyle. In this market when homes are in short supply, new construction can be the way to go. A1 Mortgage is here to help you with this whole process.
Get in touch today!