Home owners must ensure that they maintain the beauty and structure of their home. When a home deteriorates or has repairs that go without being replaced, fixed or taken care of, the value of the home significantly decreases. Home construction loans for rebuilding, remodeling or making additions and repairs is imperative for ensuring the longevity and value of your structure. There are several types of home construction loans and each is based upon the needs of the builder. Some home owners purchase homes that are in badly need of repairs, and make the deal with the intent of repairing and rebuilding the property. Many find that buying properties that have been foreclosed upon then getting home construction loans to make the repairs is a great way to make an investment.
A very popular home construction loan is the FHA 203 (k). The FHA 203 (k) has included higher loan limits and is reserved for those who live in their homes or “owner occupied.” FHA 203 (k) are not for those who are intending on buying foreclosed homes to rent. The FHA 203 (k) is also an attractive choice as the loan comes with a low down payment. These loans are also desirable as they are applicable for more than single units but for also four unit dwellings as well as condominiums. The FHA 203 (k) loan can also be used to turn a single home into a two or four unit property.
In addition to Federal home construction loans, there are also private loans available through banks and other private lenders. When choosing home construction loans, make certain to perform your research so that you are best equipped to get the loan that will meet your needs. You can select from fixed rate loans and ARMs. Fixed rate loans may come in 15 or 30 year intervals. You can also select from a 1 year ARM, 3/1 ARM, 5/1 ARM, 7/1 ARM and a 10/1 ARM. Those who are interested in obtaining home construction loans should apply for pre qualification.
Prequalifying for a construction loan will help you determine what your monthly payments may be and can help you ensure that you have all your ducks in a row. Make certain that you understand the lender’s guidelines, rules, interest rates and any fees associated with the loan. Pay close attention to your credit score as well. If your credit score is low, then take the time to repair your credit and increase your credit score.
The majority of home construction loans are considered story loans. This indicates that you must explain what you are going to do with the loan. Your relationship with the lender is the most important to obtaining your loan, so make certain that you have all your information together so that when you speak with the lender you are prepared to thoroughly explain your building plans.
Compare different home construction loans and lenders and find a lender that has experience in construction loans. Determine how much the loan to cost (LTC) is required for the loan, as well as the cash equity as this could be anywhere between 5% and 20%. You’ll also need to determine whether you will receive the loan in a voucher or through a draw disbursement system. The majority of borrowers obtain their loans through the draw disbursement system. The draw disbursement system is the best way for borrowers to get the funds they need when it is most needed.
Always determine the rates of any loans you are interested in and make certain that you read through the fine print. Look for any hidden fees and make certain you understand how much your payments and interest rates will be on any loan you agree to.