What You Need to Know About Construction Loans When Buying a House in Wantagh
Sometimes you just can’t find that dream home that checks all your boxes. So what do you do? Many people have a custom home built, and others buy an existing home with plans to remodel extensively and turn it into their dream. In either case, they’ll need a construction loan – and that’s a different animal from a standard mortgage loan. So here’s what you need to know about construction loans when buying a house in Wantagh.
So, first, let’s see exactly what a construction loan is with respect to buying a house in Wantagh . . .
“Construction loans are shorter term, higher interest rate mortgages that cover the cost of building or rehabilitating a house. The lender pays a construction loan to the contractor — not the borrower — in installments as building milestones are achieved. Once building is complete, home construction loans are either converted to permanent mortgages or paid in full.”
The great thing about a construction loan is that it allows you to have everything you want in your home. You’re not limited to only what you get in an existing home. But the construction loan process can be fairly complicated. You can find out even more by contacting a Wantagh agent at (516)729-8288.
There are several types of construction loans, each with a different purpose. As they relate to buying a house in Wantagh, these types are as follows:
This type of loan does double duty by providing financing for both the construction and your permanent mortgage. “In other words, with a construction-to-permanent loan, you borrow money to pay for the cost of building your home, and once the house is complete and you move in, the loan is converted to a permanent mortgage. The benefit of this approach is that you have only one set of closing costs to pay, reducing your overall fees.”
As the name suggests, this type of construction loan provides funding only for the construction portion of buying a house in Wantagh. “The borrower is responsible for either paying the loan in full at maturity (typically one year or less) or obtaining a mortgage to secure permanent financing . . . The funds from these construction loans are disbursed based upon the percentage of the project complete.”
This type of construction loan applies to buying a house in Wantagh that you want to extensively remodel or upgrade. A renovation loan can take any of several forms, so if you intend to go this route, contact your Wantagh agent at (516)729-8288 to find out more.
“Owner-builder loans are construction or construction-only loans where the borrower also acts in the capacity of the home builder.” The problem with this type of loan is that “most lenders won’t allow the borrower to act as their own builder because of the complexity of constructing a home and experience required to comply with building codes.”
A construction loan is different from the traditional mortgage loan you would get for buying a house in Wantagh. Here are some of the differences you’ll encounter with a construction loan:
Now, if you decide to get a construction loan, there are a few things you need to keep in mind, such as:
So if you can’t find your ideal home, your dream doesn’t have to end there. You have the option of getting a construction loan and building your dream home from scratch or turning an existing home into your dream home. And you have several construction loan paths you can choose from to help you realize your dream.
It’s just that a construction loan is a specialized kind of loan and may require more effort and stricter qualifications – even if you’re buying a house in Wantagh to remodel and/or upgrade. Be sure, then, to consult a Wantagh agent to find out the best construction loan option for your needs. So if you’re looking into a construction loan as part of your plan for buying a house in Wantagh, contact us today at (516)729-8288.
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