Understanding Your Construction Loan:
-
A construction loan is a short-term solution specifically designed to support the building of your new home.
-
The loan is divided into two phases: one for construction and one for the permanent mortgage.
Two-Phase Structure Simplified:
-
During construction, you'll pay interest only on the funds you've used, making it manageable and flexible.
Down Payment Insights:
-
Expect a slightly higher down payment (20-30%) compared to traditional mortgages.
Interest Rates Awareness:
-
Construction loan rates can be a bit higher initially, but we'll explore options to lock in favorable rates later.
Loan-to-Value Ratio Explained:
-
Your loan amount is tied to the property's appraised value; understanding this ratio is crucial.
Credit Matters:
-
A good credit score and financial stability are key for securing the best terms.
Construction Timeline Expectations:
-
We'll discuss the anticipated timeline and why sticking to it is vital for cost control.
Setting Aside Contingency Funds:
-
Including a contingency reserve in your budget will help cover unexpected costs during construction.
Understanding the Draw Process:
-
Funds are released in stages as construction progresses, and proper documentation ensures a smooth process.
Transition to Permanent Mortgage:
-
After construction, we'll seamlessly transition to a permanent mortgage, possibly with refinancing options.
Insurance Matters:
-
We'll guide you on necessary insurance during construction, including builder's risk coverage.
Pre-Approval Importance:
-
Getting pre-approved streamlines the process, and we'll walk you through the necessary documentation.
Potential Risks Awareness:
-
It's important to be aware of potential challenges such as cost overruns or delays, and we'll plan accordingly.
Understanding Your Construction Loan
A construction loan is a short-term solution specifically designed to support the building of your new home.
The loan is divided into two phases: one for construction and one for the permanent mortgage.
Two-Phase Structure Simplified
During construction, you'll pay interest only on the funds you've used, making it manageable and flexible.
Down Payment Insights
Expect a slightly higher down payment (20-30%) compared to traditional mortgages.
Interest Rates Awareness
Construction loan rates can be a bit higher initially, but we'll explore options to lock in favorable rates later.
Loan-to-Value Ratio Explained
Your loan amount is tied to the property's appraised value; understanding this ratio is crucial.
Credit Matters
A good credit score and financial stability are key for securing the best terms.
Construction Timeline Expectations
We'll discuss the anticipated timeline and why sticking to it is vital for cost control.
Setting Aside Contingency Funds
Including a contingency reserve in your budget will help cover unexpected costs during construction.
Understanding the Draw Process
Funds are released in stages as construction progresses, and proper documentation ensures a smooth process.
Transition to Permanent Mortgage
After construction, we'll seamlessly transition to a permanent mortgage, possibly with refinancing options.
Insurance Matters
We'll guide you on necessary insurance during construction, including builder's risk coverage.
Pre-Approval Importance
Getting pre-approved streamlines the process, and we'll walk you through the necessary documentation.
Potential Risks Awareness
It's important to be aware of potential challenges such as cost overruns or delays, and we'll plan accordingly.