If you own a home, you may be familiar with traditional mortgage loans for homeowners. But construction loans are another financing option. Designed for prospective home builders, they offer short-term financing to help cover the cost of building or renovating a home. If you’re planning to build your dream home rather than purchase an existing one, a construction loan might be right for you. A mortgage broker Las Vegas can give you the lowdown on construction loans and help you determine if they are a viable option.
What are Construction Loans?
Construction loans differ from traditional mortgage loans in several important ways. While a mortgage loan is based on a home’s market value, a construction loan is based on the expected value of the home after the construction is finished. Construction loans are structured in three ways: construction-to-permanent loans, construction-only loans, and renovation construction loans. A construction-to-permanent loan is recommended if you have concrete plans and a definite timeline for your home’s construction. With this loan, the bank pays the contractor as construction reaches certain milestones. A construction-only loan must be paid off completely when the building is finished. This type of loan is ideal if you have large amounts of cash available. A renovation loan is designed to help you renovate an existing structure. In this situation, the anticipated cost of renovations on your property is combined with the mortgage.
How do Construction Loans Work?
In contrast to standard mortgage loans, construction loans are short-term financing options. They generally last one year or even less. Construction loans have variable interest rates. Construction loans are considered slightly riskier methods of financing than traditional mortgages, which means your interest rates may be higher than they are with a traditional mortgage. Since construction loans have different qualification guidelines than traditional mortgages, they require larger down payments. A minimum down payment of 20 percent is generally required for this type of loan.
Selecting a Construction Loan
Choosing the right construction loan depends in large part on your current financial situation and whether you’re planning to build a home from scratch or renovate an existing structure. Since it can be difficult to determine which type of construction loan is best, it’s a good idea to contact an expert for assistance. A skilled mortgage broker Las Vegas can explain the differences among the construction loans and help you find one that’s right for your budget.
If you need assistance finding and selecting a construction loan, don’t hesitate to contact us. With an experienced and knowledgeable staff, we are proud to offer personalized services and lead you through the loan process every step of the way. We are here to help you find the best loan rates available and a loan structure that works for you. Call or visit our website to learn more and get home financing assistance from the best loan officer Las Vegas today: https://drennenhomeloans.com/.