Building a dream home tops many peoples' bucket list. It provides a chance to choose a design that suits their personality and provides the ideal functionality for their family. When you build your own house, you also don't have to spend a fortune buying a home and then endure an expensive rehab project. The house is perfect from the day you take up residence.
Most of us don't have hundreds of thousands or millions of dollars lying around, so crossing building your dream home off your bucket list requires financing. Here at Hometown Lenders, we offer what we feel is the ideal form of funding for new construction: construction-to-permanent loans.
These loans differ from other types of construction loans in that they automatically convert to a regular mortgage when construction is complete.
As you'll see in the following paragraphs, this saves money and secures your interest in the property.
Construction-to-permanent loans finance the new build and are then converted into a purchase loan at the end of construction. This differs from a construction loan. A plain construction loan finances the build only. Upon completion, you need to apply for a mortgage. This leaves you in danger of being forced to pay a higher interest rate or even losing the home.
Building even a small home takes months, and builders need years for some of the larger ones. With a plain construction loan, you are subject to the risk of interest rates rising, which could result in a much higher than anticipated mortgage payment. Your personal circumstances, such as your income, could also change, resulting in a higher interest rate or inability to qualify for a mortgage on your dream home.
A construction-to-permanent loan can reduce these risks. It is also based on the projected value of the home after construction. Construction-to-permanent loans are a construction loan and a purchase loan wrapped into one streamlined process.
Construction-to-permanent loans reduce risk by allowing you to lock your interest rate and enjoy steady payments. During construction, you make interest-only payments. The lender pays the builder in draws according to a pre-planned schedule, and you make payments only on money that has been disbursed.
The lender disperses loan proceeds according to a pre-planned schedule. This benefits the borrower because it contains costs. Your home has to be built within the loan budget, which prevents you from making costly mistakes and keeps the home builder honest. The lender also inspects the work along the way to ensure the project stays on track.
Though staying within budget is important, construction-to-permanent loans are flexible. No one can completely foresee every occurrence. Because of this, construction-to-permanent loans are adjustable within reason.
Hometown Lenders offers its services to help you build your dream home. Construction-to-permanent loans are a niche product that serve a specific need that not all borrowers may need. Hometown can work with you to ensure that you are in the best product for your needs.
Our loan pros are standing by to help you get the financing you need stress free. Please start your application at Hometown Lenders.