Rather than search the market for an existing house, many people opt to build their own home with all the features and amenities they want. Finding financing for this, however, can be a tricky process, especially for someone who has never done it before. Here, we’ll walk you through how to get a loan to build a home.
Research Financing Options
Based on your credit history and your financial situation, what type of loan is available to you? Construction-to-permanent loans are popular and very convenient, but may have slightly higher rates than stand-alone construction loans. The benefit to these loans, also known as all-in-one construction loans or one-time close construction loans, are that you can lock in the interest rate early in the process, and there is only one closing and one set of closing costs.
How much you can afford to borrow? Loan terms are usually based on your reputation as a borrower, the collateral you can provide, and your financial situation. The following information will help lenders determine how much of a loan you qualify for:
- Credit reports with your credit score
- Income data, including pay stubs, W-2 and W-9 forms, and tax returns
- Personal information, including DOB, current address, past employers, and so forth
- Specifications of the house you want to build
In the case of a new construction loan, you won’t likely have any collateral to use unless you plan to build on your own lot. In this case, a down payment of 5-20% is usually required.
Once you know how much new house you can afford and have pinned down a favorable lending option, it’s time to start the application process. The benefit of a one-time close construction loan is that the loan qualification process is much simpler in that there is only one loan, one application, and one approval needed.
Highly affordable all-in-one construction loans are available through Anna DeCamp at First United Bank. Depending on the loan amount, you may be able to get a loan with as little as 5% down. And you only need a credit score of 680 to qualify! If you are trying to get a loan to build a home, contact Anna DeCamp today.