Finding the perfect house is the beginning of your house-hunting journey. The next step is to find the best construction mortgage loan that will give you the best value for your dollar. So what are the steps you need to take? Here are some of the things you need to know:
The higher the credit score, the better. Lenders would give favorable interest rates to those who can prove that they are good payers. So, if you have a high credit score, 700+, you will get the best interest rates in the market. Does this mean that if you don’t have a good credit standing, you can’t avail of a construction mortgage loan anymore? Of course not! You can still benefit from construction loan programs like the FHA, allowing you to make a low downpayment of 3.5% and even the VA construction loan of 0% down payment. Some options are available for everybody.
Construction mortgage loan coverage. Almost everything from the beginning to the end can be covered by your construction mortgage loan – from buying the land to the labor fees, building materials, and permits – these items will be covered. When applying, talk to your loan officer and ask for more details, and don’t forget to ask for the loan-to-value calculation.
Construction mortgage loan vs. Traditional mortgage loan. Construction loans have rates that go up and down. As it is variable, they tend to have a higher loan rate than the traditional loan. With traditional loans, your home is your collateral. So when you default on your payments, the lender can seize your home. That is not the case with the construction mortgage loan. That is one of the reasons why construction loans have higher interest rates also because lenders see it as a higher loan risk.
We have barely scratched the surface of the pros and cons of the construction mortgage loan. You can contact us for more details, and we’d be happy to walk you through the process.