Building a new home is an exciting time! There are many important decisions to make and lots of things to do to get the project started. Getting a home construction loan is at the top of the list. But you have questions: How does home construction financing work? What percentage will I have to pay for a home construction loan down payment? Where do I even find a home construction loan?
Financing New Home Construction
Home construction loans have not been widely available in recent years because these loans can be risky for the lender. There is no collateral (i.e. a finished house) to provide security, so some banks and lenders prefer to stay away from new home construction financing. Those that do offer new home construction loans typically require down payments of twenty to twenty five percent of the loan value.
5% Down Payment Construction Loan
Anna DeCamp at First United Mortgage Group offers new home construction loans with only a 5% down payment, making it far easier to meet the upfront costs of your project. The borrower can get a one-time close construction loan for up to $417,000 in total value, paying only a 5% down payment. This makes building a new home extremely affordable!
One-Time Close Construction Loans
With a conventional construction loan, repayment is due as soon as construction is complete, borrowers must get a mortgage to pay it off, requiring two loan application, two closings, and two sets of closing costs.
One-time close loans require only one approval process and one set of closing costs. Once construction is complete, the loan automatically converts into a long-term mortgage, making it much easier on the borrower, especially in cases when only a small down payment (such as 5%) is required.
Can I Get Approved?
With the low down payment and automatic conversion from construction loan to permanent mortgage, you might expect it to be difficult to be approved. In actuality, your credit doesn’t have to be stellar—only 680 (a high-average score) is required for these loans. If the idea of a 5% down construction loan sounds right for you, contact Anna DeCamp at United First Mortgage Group today.