Building a new home is hard enough without financing difficulties. Finding the right home loan solution can add to the challenge. There are two main options for new construction home loans.
Two Options for New Construction Home Loans
One option for new construction home loans is traditional financing. A traditional home loan can be used if the builder is willing to work with the traditional lender’s requirements. This usually means the builder will not receive payment until the home is complete. This option is available with large builders who are able to build homes without receiving payments throughout the construction process.
Another option for new construction home loans is a construction loan. A construction loan is often used with smaller home builders and custom home builders. If you intend to act as your own general contractor you will probably need a construction loan. A construction home loan provides payments as the construction is completed.
Qualifying for a construction loan is different than a traditional loan. A construction loan may require a larger down payment and good or excellent credit score. Most lenders will require an experienced general contractor. Your general contractor will need insurance; or you may be required to purchase insurance throughout the construction of your new home. Some lenders will require your general contractor to demonstrate strong financial stability.
There are additional complications involved when obtaining a construction loan and acting as your own general contractor. Lenders will often require additional inspections and information on all contractors being used for the entire construction process. A larger down payment may also be required when acting as your own general contractor in construction of a new home.
We have construction loans available for your new home. If you are ready to apply please complete the pre-approval form below and our home loan officers will contact you directly.