Building from the ground up is the best way to create your dream home. However, to do it, you’ll need a new construction loan. It’s important to understand that these are different from traditional mortgage loans. You’ll need to make preparations, so use the guide below to help.

Securing a New Construction Loan

Understand Your Options

Since your home, which is the asset in question, isn’t built yet, lenders are more hesitant to provide loans. This is because if plans fall through during construction, they have no asset to seize as repayment. Usually, you’ll need to provide a 20–25% down payment on the loan, and you’ll face higher interest rates. Check your savings to ensure you can afford the down payment and make sure that the monthly mortgage cost won’t account for more than 30% of your monthly income.

Loan Types

There are several new construction loan options:

• Construction Only: This covers the cost only for the construction of the home. Depending on the lender, you can couple this a traditional mortgage that you can commit to during construction.
• End Loan: In this scenario, the builder takes out the loan and completes the home. You’ll then purchase the home from them with a traditional mortgage.
• Construction-to-Permanent: This new construction loan allows you to convert the construction loan into a traditional mortgage once the project is completed.

Builders & Loans

You’ll want to have a viable homebuilder right away so they can provide all the details about the construction project to the lender. They’ll also have to work with a home inspector that the lender will send to the construction site regularly to check progress. Make sure to find a reputable contractor in your area for the best experience.

If you need assistance securing a new construction loan, turn to a professional. Dan Main of St. Peters, MO, brings over 20 years of experience as a loan office to customers. He can help you explore a variety of options ranging from traditional mortgages to FHA and VA loans. Explore his services in full on his website, and connect on Facebook for news and updates. If you’re ready to schedule a consultation, call (636) 284-4144 today.

Dan Main: NMLS # 502036
Flat Branch Home Loans NMLS # 224149
947 Waterbury Falls Dr
O’Fallon, MO 63368
This is for informational purposes only and not an offer to lend or extend credit.