You may have a lot of expectations from your dream home—an oversized master bedroom, a live-in closet, a gourmet kitchen or perhaps a covered patio to flaunt the outcome of your green thumb. Know what? Thousands of Americans fail to incorporate their desired features into their dream homes even after obtaining the jackpot of land in their dream destination. Why? Due to lack of budget. How to fill in the gap between your aspiration and your resources? Avail the right financing option. Besides builder financing, you can also opt for loans that are designed specifically for new homes, namely the bridge loans and the new-construction financing. Here are brief descriptions of each option and how you can utilize them to fund your project.
Loan for New-Construction
Different from a standard mortgage, the new construction loan is a specially-designed financial product. Both homeowners and contractors can avail this type of loan to accumulate short-term funds. The new construction financing is intended to help homeowners kick start their building project by providing them with short bursts of cash under six to one-year terms. If you wish, you can also convert it into a permanent long-term loan of 15 or 30 years. Community banks are the best source for taking this loan. However, you will have to make a substantial down payment to qualify for the credit, and also be prepared to pay a ‘prime-plus’ (4.25 to 4.5 percent) interest rate for the entire span of the construction.
These are also short-term loans that you can avail for a six-to-nine-month term. As its name suggests, this loan helps to bridge the time gap in situations when you need money urgently. For example, when you want to start the construction of your new home, but could not manage to sell your current apartment in time, and as a result, don’t have all the cash you need, a bridge loan may help. The lender will provide you a lump sum money on the basis of the equity on your current home. Naturally, you need to place your home as the collateral in the deal. Besides banks, many builders offer such type of financing through their subsidiaries. Since these contracts are for an extremely brief period, opt for it only when you are 100 percent sure that you will be able to sell off your home before the loan term expires. They are also more expensive than regular mortgages, commanding at least two points higher rate.
With an extensive knowledge of loan options, it will be easy for you to find out what suits you the most. If you want further information on this matter, we are here to help. Get in touch with All States Home here.