It’s true that construction loans are more difficult to obtain than a standard mortgage, but this type of loan can be well worth it for the right type of individual.
Build Your Dream Home
This is the biggest advantage of all. If you’ve lived in your current home for several years and are ready for something that’s completely your own, building a home might be the opportunity of a lifetime. There’s nothing more rewarding than making plans to build a custom home and watching those dreams come to fruition. No detail is out of reach—you can design your home from top to bottom and watch it come to life every step of the way. Construction loans can be tricky to qualify for, but after the process is completed living in the home you’ve always dreamed of is the ultimate reward.
When you’re approved for a construction loan, you’ll only need to make interest payments while the home is in the process of being built. If you haven’t yet sold your current home, the small payments on the construction loan will allow you to continue to live in your current home while the new home is under construction.
If you’d rather do a one-stop-shop, then construction-to-permanent financing offers the big advantage of one set of closing costs and an easier process. With this type of plan, the loan starts off as a construction loan and is later converted into a traditional mortgage. This type of loan allows you to pick one lender for both loans, as they are “rolled” in together for ease and efficiency.
Your Builder Can Carry the Loan
If your builder will agree to carry the loan, this is a big advantage. It’s usually easier for builders to get construction loans, since building is their line of business. When your builder carries the loan, it’s likely that your project will stick to a strict deadline. The builder will be more motivated to complete the project on time and on budget if the loan is in his or her name.
Construction loans can be complicated to obtain, but they’re often well worth the hassle and come with big advantages. If you have an established career and the savings and credit score to match, then a construction loan might be an excellent option. Construction loans give you the advantage of designing the home of your dreams and making small payments until the project is completed. If your builder will carry the loan, then it’s likely that you’ll be living in the home of your dreams in a short period of time.