| Although having the exact home you want is an | | | | Some banks will offer you a package deal called a |
| outstanding benefit, financing home construction can be | | | | "combination c and p" loan with just one set of closing |
| a different matter. If you're working with a custom | | | | costs. This makes up both a construction loan and a |
| builder, you will need to assume something known as a | | | | conventional mortgage loan wrapped up in to one. A |
| "construction loan". This is the loan that pays off the | | | | combination C&P loan will save you time and |
| builder while they build your home. Construction loans | | | | hassle in the long run. |
| are typically short term loans that pack a higher | | | | Traditionally, a construction loan works as follows. You |
| interest rate than your traditional mortgage. | | | | apply through a lender for a construction loan secured |
| If you're purchasing a starter home, this might thankfully | | | | by the home that is being built. Because the home is |
| not apply to you. Builders of "starter homes" | | | | not yet built, the lender is taking on additional risk by |
| understand that a lot of their potential buyers are not | | | | financing you and this will be reflected in your rates. |
| able to qualify for a high rate construction loan nor do | | | | As the house is constructed, the builder will ask for a |
| they understand or care to acquire a short term loan | | | | "draw" or percentage of the cost based upon the level |
| then a long term loan. For this reason, entry-level | | | | of completion of the home. This will come about at |
| homes are frequently financed by the builder or else | | | | several stages during the construction of your new |
| the builder merely builds the homes out of pocket, | | | | home. The bank that's financing your construction loan |
| handling the lot and all of the construction costs of the | | | | will compensate the builder for these draws and |
| house. If this is the case with your builder, you will need | | | | construction will progress to the next stage. |
| nothing more than a traditional loan. | | | | Around thirty days prior to the home being completed, |
| If it does turn out that you will require home | | | | you will want to apply for a traditional mortgage |
| construction financing, it definitely pays to browse | | | | subject to the house being complete. This way, the |
| around for best rates and lender with which to obtain | | | | construction loan is paid back and the permanent |
| one. As construction loans are generally fixed at a | | | | financing is put in place as quickly as possible after the |
| higher rate than conventional home loans, you'll want to | | | | house is built. |
| pay off the construction loan as promptly as possible. | | | | |