The Nature of Home Construction Loans
A new home construction loan is a source of funds for you to erect the house of your dreams. A home construction loan differs from a home loan in the sense that you get to be involved in the creation of the home, not just the purchase of a finished house.
A home loan normally begins charging you interest from the start. Since the house is complete and its value is known, it is only right that the interest is charged so. A home construction loan cannot have similar terms since the house has first to be set up. You therefore make payments without interest being a factor. The condition placed on the loan is once you receive it, you have one year to be done with the construction. The moment the house is complete, the permanent loan amount kicks into effect, with the interest rate being added.
In your processing for this loan, you get to discuss and agree on the terms once. You will then be financed throughout the construction, after which the total loan amount will be considered while at the end of that period. You get to enjoy loan amount and its payments, not separate loans as per the number of cash injections during the construction phase. You will have it much easier since there is only one set of paperwork and one recurring payment to worry about. You also get to agree on the applicable interest rate at the beginning of the process, which does not change later.
The loan amount takes into consideration the future value of the house. You will see an appraiser using certain variables to draw that conclusion. They consider the kind of house to be built, the materials to be used, the cost of those materials, the labor costs involved, the cost of the land used in the construction and its present value, and the overall cost of the permits and planning services.
You need to be keen on the selected general contractor, and the details contained in the contract you will both get into. You can only go on with the contract after vetting them properly. By taking into considerations the steps mentioned, getting the process to success becomes much easier.
A newly constructed house feels much better and gives you more satisfaction having watched it rise from the ground up. You need to be thorough with your research into and application for the loan. When you need professional help in the process, you can visit this site. You will find it to be a great resource, touching on matters such as construction funding, land and spec construction funding, construction financing, new home construction loans, and new construction funding.