Bluestar Mortgage of Schaumburg, offers a variety of options on Construction Loans. Give us a call at 847-230-4030 to speak with a Construction loan expert who can assist you in determining if a Construction loan is the right option for you. You can also click on the schedule a free consultation button above.
A construction loan is a type of special financing, a short-term loan, used to finance the expenses of custom home building. As soon as the home is constructed, the buyer takes out a construction loan to compensate for the completed home.
Various other loans are accessible on home building, from the foundation to a complete modification of a perfect house. Whether you are making a fresh start with a land loan or entirely refurbishing a home, a prospective loan will always be available that best suits your needs.
This short-term loan is typically granted for one year covering solely the actual construction period. This loan is regarded as a higher-risk loan since several considerations include the builder’s cooperation, securing endorsements from local municipalities, and more. It won’t be easy to be eligible, and the interest rate might be higher than a conventional loan. Furthermore, if you choose this kind of loan, you need to settle second customary loan fees once you employ for a conventional loan.
Like a construction-only loan, this financing choice for potential custom home builders is a one-time loan that finances construction and transforms into a permanent loan. Interest-only payments are made for the duration of the assembly period. However, this kind of loan might be costlier than a conventional loan and if you opt to avail yourself of such, be sure to scout and weigh rates to determine the best deal before finally deciding on a loan.
This kind of loan is protected by the Federal Housing Administration (FHA) and is also called FHA 203(k) loan that can be used for house restoration. This loan permits the borrowers on both the procurement and refurbishment of a new home by taking a one-month payment to cover both expenses. Traditional loan borrowers may be eligible for this type of loan through Fannie Mae (Home-Style Renovation) and Freddie Mac (CHOICE Renovation).
Generally, in-home construction, a contractor is hired to see the overall operations and ensure coordination of all the works for the completion of your ideal home, preferably with consideration of time and expenses. But there are potential home builders who want to be their own general contractors, and for this reason, other banks provide this owner-builder loan. Usually, in this kind of loan, the borrower needs to prove an education, expertise and licensing to manage the construction of a home.
An end loan is a conventional loan that a home buyer or builder may engage in after building the new home. That means you can obtain the end loan once the entire home construction is complete. One great feature of the end loan is that the loan application for a newly constructed home is similar to any other home.
Below are a few typical queries prospective home buyers have about the construction loan to answer and understand further.
1. Are there higher requirements qualifications for construction loans?
In terms of credit score and initial payment, the construction loan usually has higher qualifying standards. Typically, a 20 percent minimum down payment is needed and at least a 620-credit score rating.
2. Can I use any extra money for home fixtures?
The funds obtained through a construction loan are paid up-front to the contractor, which gets payment for the accomplished work. The borrower then pays only the interest on what was disbursed. Once the construction expenses are below the original loan cost, you save money, but you will need to look for alternative funding for your home fixtures.
3. Do construction loan include the design period of home construction?
The answer is no. A potential custom home builder must fund the design phase of the home construction contract personally. Furthermore, prior to obtaining a construction loan and the commencement of the loan application, a builder’s contract, construction timetable, designs, and a realistic budget must be presented.
If you are interested in a construction loan, call us at: 847-230-4030 to speak with a Construction loan expert who can assist you in determining if a construction loan is the right option for you.