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15 Construction Loan

15 Construction Loan

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Published by alvah

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Published by: alvah on Jul 08, 2008
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09/05/2010

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What exactly are the initial things that you need to get started in building you new home?
Pre-qualification.
Getting pre-qualified for a particular loan amount is important for a few reasons.1. To determine if the requested loan amount is within your budget.2. To find out what the monthly land or mortgage payment is going to be.3. To make sure you qualify before you run out and buy land.4. To make sure your credit fits the land and construction loan guidelines of the lender.3. 
House plans.
There are some great house plan resources on the internet. Just go to Google and type in houseplans or architect for your local area and you will have more sources than you can handle. Once you pick out ahouse plan that fits your needs and expected budget simply buy a few sets and start getting estimated bidsfrom builders.
Before you even think about applying for a construction you need to get pre qualified, buy land andpick out a house plan.
2. 
Land ownership.
If you do not own land you are going to need to buy the land first. You will need to either 1. Pay cash for the land. 2. Get aland loan. 3. Buy land from the seller with owner financing or 4. Find a seller willing to wait for you to get house plans a building permitand a realtor willing to wait months for their commission (highly unlikely).Buying the land with a land loan first allows you to take the land off the market so others cannot buy it before you do. It also allows you plentyof time to pick out house plans, submit the plans to the county for approval and obtain a building permit all while obtaining the bestconstruction loan.lender.**Construction loans can include the land into the construction loan only if you already own/buying the land with a land balance to add into theconstruction loan.
 
 
There are plenty of banks willing to lend money for mortgages, refinancing, home equity loans and every other type of loan. But if you'replanning on building a new home, where do you get the best construction loan with the most competitive pricing?More importantly what is a good construction loan?When you call any officer, 99.9% of the time the person on the other end of the phone (assuming you actually human being) will rarely be ableto direct you. If you do find a bank that will do a construction loan, they usually can only offer one product that may or may not becompetitive in today's marketplace.A typical construction loan nowadays is a construction to permanent loan that may or may not allow you to lock-in today's low interest ratesuntil the home is completed. If you choose a loan that does not allow you to lock in upfront, the interest rate may end up higher alongwith your monthly payment.This is usually not what you want, so be careful. Some things to watch out for are.Some lenders have a higher interest rate if you lock in upfront. Some lenders try and sell you on a higher rate or adjustable rate duringconstruction with the hope of a float down rate after the home is built. Some lenders have a non competitive long term lock along with afee. Some lenders have such bad service no matter what rate or program they have its not worth doing business with them. Call me and Iwill tell you exactly who that lender is.The most important thing when searching for a good construction loan is to find an experienced construction loan specialist that knows whichbanks are the best.The best banks can offer you a low rate now, upfront, before you start building your new home.
2. Which lenders/banks have the best construction loans?
Home loan banking and the internet has changed the mortgage and construction loan industry forever. Today'sconstruction loan choices include the 30 year fixed, 15 year fixed, 1 year ARM, 3/1 ARM, 5/1 ARM, 7/1ARM, 10/1 ARM and don’t forget the popular interest only loans.The construction loan of the past was a short term 1 year loan that the customer would have to refinance into anew loan once the construction was completed. This two time process cost the customer two sets of closing costs and you would have to re-qualify for the new loan once the home was completed.The most popular construction loan today is the "One Time Close" but not all are created equal. Just like anyproduct there are the best loans, good loans and downright bad loans.Call me on my direct line (800) 753-5126 and I will tell you who the good the bad and the ugly are.
 
 
With today's technology you now have the ability to obtain a construction loan from the best banks in the country and sign your loandocuments at your local title company or escrow office. This benefit allows you to have the most competitive construction loan available.The loan that you should apply for is simple; ask for the lowest rate, one time close for a specific period of time that you think you'll be livingthere. The graph below shows the type of loan you should apply for depending on your needs.

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