How many of us wish for a dream home, a comfortable environment where we can escape to after a working day, one that has character and reflects our needs? Many of us indeed but not all of us have the resources that allow us to do this when and how we wish and need to ask for loans if we want our dream to come true.
House loans can be very hard to get and also a long term monthly expense that can add pressure to other bills and monthly payments. However, residential construction loans are not the same as home mortgages most of us are usually acquainted with and can offer solutions for those who plan to buy a home.
First of all you need to discern from the several different types of residential construction loans. Amongst these you will find a custom contractor loan, an owner builder loan, a remodel or addition loans and a tract or subdivision loan.
A custom contractor loan will hold you responsible for the outcome and completion of the construction. An owner builder loan will have you act as a general contractor, where you have to make sure the construction is completed on time and the budget is kept. A remodel or addition loan can help you remodel your home to add extra space without having to actually move elsewhere and will take into account the value of the property after changes. A tract or subdivision loan will be useful when building a house in a subdivision, when you wish to add extra structures or upgrade the builders standard plans.
Before applying for a loan you will have to calculate the costs, which will include the building site expenses, home design, construction costs, subcontractor expenses and financing costs. Once you have these clear you can pre-qualify for a construction loan, which will take into account your down payment possibilities, your credit record, the market value of your home and they type of loan you are asking for. This will allow you to have a clear idea of the amount you can afford to finance the building of your home.
As residential construction loans are not all similar, you will have to take into account what it is you really need. Most of these loans are based on a six month or yearly plan; this means you should finish the construction by this time frame. Some have fixed interest rates others offer variable interest rates that follow the market trend. Bridge loans are also available and these allow you to use equity from the home you are living in at the moment of construction until the new one has been built. The best choice is a construction home that can be changed into a mortgage loan, this will avoid having to fill out more than one application and associate the costs of just one closing, which will reduce fees and expenses.