How To Get The Construction Loan You Need
Joseph Kenny
Being able to move into your new house is a great day. Knowing
that you got the right construction loan to do it will help you
sleep at night after you move in. With so many choices available
today, it could be difficult to know where you should start
looking and what features are the best. Here are a few tips
for you to enable you to find a good deal on your construction
loan.
The first thing you will need to do is to find out from a
lender exactly how much you are able to obtain for your
financing. After you know that figure, then you will understand
how much you have to spend toward the whole project. You should
also have a real good idea what additional costs there will be
such as closing costs and other expenses needed to provide the
house with all utilities, too.
After that, it comes time to select a home design. After
choosing a general plan, you need then to talk to an architect
and contractor. The architect will charge a rather hefty fee to
adopt the general plan to your specific design, so you should
know what it is and how many revisions it will give you. After
talking with them and getting your plans drawn up, this will
give you a near accurate representation of what it will cost to
build your dream house. After you have your figure, you will
need to go back to the drawing board and redesign your house -
especially if it costs more than your budget allows.
After your plans are finalized, then you can approach your
lender for the construction loan. He (or she) will require
these plans before you are given any money. Keep in mind that a
preapproval (which is often free) is not the same thing as
having the construction loan.
You should learn all you can about the construction loan
options available to you. It is easier if you have a
construction loan that is convertible to a permanent loan. This
will enable you to save some money and will be easier to obtain
because it will be from the same lender. Be sure you have this
feature in your contract.
Construction loans will usually require a Downpayment of 10% in
order to qualify. A Downpayment of 20% will be required in order
for you to not have to pay private mortgage insurance. Another
way to avoid PMI, is to piggyback your loans. This means
getting a first mortgage for 75 to 80%, and then taking out a
second mortgage for the balance of 20 to 25%.
When it comes time to change from your construction loan to a
permanent loan be sure that you are aware of the trends in
interest rates so that you will understand whether it would be
better to get an adjustable rate mortgage or a fixed rate
mortgage. It is also possible to have a small cash flow on some
mortgages that will allow you to make some additions to your new
home.
About The Author: Joe Kenny writes for the UK personal finance
sites
http://www.ukpersonalloanstore.co.uk and also
http://www.cardguide.co.uk
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