Many people dream of building their own home, but few have the cash to cover the cost outright. They’re not very common, but some mortgage companies offer construction loans that can later be converted to conventional mortgages. Visit a mortgage company in Las Vegas to find out how to qualify for a home construction mortgage.

How Easy is it to Get Financing to Build?

It’s best to go to a bank where you have a history due to the difficulty in qualifying for a construction loan. Banks like to have something tangible to secure loans. If you already own the land, then you’ll have a little collateral to put up as security. Construction loans are considered short-term loans, and the term is usually for one year. The interest is slightly higher and based on the prime rate, which can fluctuate.

What Do You Need to Qualify?

Due to lack of a house to secure the loan, like when you’re buying an existing home, you may have strict guidelines to follow to get the funding. When you apply for financing, you’ll have to have good credit, adequate income, and a higher than average down-payment, usually about 20 percent. You’ll also need to produce a construction timetable, detailed building plans, and a realistic budget, which is sometimes called the ‘story’ of the loan.

Upon approval, you’ll be put on a draw schedule so you can pay your architect and contractors. The schedule will follow your official construction timetable, and a monitor will check on the progress of the construction before approving drafts. Your payments during this stage will be interest-only.

What Happens After Construction is Finished?

Construction will be considered completed by the mortgage company when you receive your occupancy permit. Your contractors will also have to sign a lien release proving they’ve been paid in full. At that time, your loan will roll over into a 30-mortgage, and you’ll have to pay closing costs again. Your lender may also combine the two types of loans to form a construction-to-permanent financing agreement, requiring you to close one time rather than two.