Wednesday, April 27, 2016

Your Guide To Building A New Home

Because the current real estate market favors buyers, a number of people believe that they'll get their money's worth out of any used home they buy. Although it's true that many used properties are priced low, they're not ideal for every family. For some, it's smarter to get a construction loan so that they can build a beautiful new home for themselves.

Building a home may sound prohibitively expensive or overly challenging, but it's a very real possibility. People just need an understanding of construction loans. Currently, most people opt for a construction-to-permanent loan. These loans cover the cost of the lot as well as the cost of home construction and become a mortgage once the house has been built. The process is quite similar to the one followed when someone buys a used home. They make a down payment, then make payments at a fixed rate. Once the home has been completed, the loan will convert to a fixed mortgage.

In some cases, buyers will be able to make interest-free payments while the house is being constructed. However, this is not an option offered by every bank. When it is offered, the bank will determine how many interest-only payments can be made ahead of time. These funds will typically be deposited into a separate account. People who are currently making mortgage or rent payments may find an option like this ideal. From there, the contractor will provide a release schedule. This will give both the buyer and the bank an idea of what to expect.

If you're considering a new home construction loan, you'll want to make sure you keep these things in mind.

1. Be aware of what you can afford

Don't take on more than you can handle. Use a loan calculator to determine what kind of loan makes sense for you. Make sure that you have enough saved to make a 20% down payment. Otherwise, you'll be stuck dealing with PMI payments.

2. Compare loan rates

Make sure you get the most competitive loan rate you can. Shop around and talk to numerous lenders and banks. You may want to ask your contractor if there's a lender they'd recommend.

3. Read over the pre-approval papers

Once you get approved for a loan, banks should send you some pre-approval paperwork. Read over them so that you can compare them more accurately. See what the closing costs and tax rates will be; you don't want to be surprised by any hidden costs.

4. Seek out a great contractor

When you're getting a new construction loan, finding a reputable contractor is crucial. Make sure that your contractor is properly licensed and fully insured. You should also make sue they've built new homes before. Work with them to determine a budget, building costs, and to come up with a plan for your home.

5. Find the right lot

Work with a realtor to find the right lot for your home. Make sure you have all of the building permits you need and ensure that there won't be any issues with your septic or water system.

After you've completed these five steps, you'll be in the perfect place to start work on your new home
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