Construction Loans | New Home Building Mortgage
What's affordable? Establish your financial parameters prior to shopping for a home design. This avoids setting your new home dreams higher than you can afford. Thus, the need to have financial criteria.
Begin by ordering a credit report on yourself. If there are any negative issues, it would be wise to have them corrected before meeting with a lender. The cleaner your credit record is, the more favorable house mortgage interest rate you can expect. "Our Home Building Guide" can assist you with this or the use of an accountant is suggested.
Next, establish your financial assets. Determine the equity in your present home and other investment, i.e., stocks, bonds, savings, 401(k) accounts, etc. All should be taken into consideration as part of your down payment. Then list your liabilities. Again, sources for assistance are in our guidebook and/or an accountant.
You're nearing the point of meeting with a home mortgage lender. Before you do, phone a few mortgage companies, mortgage banks and/or credit unions to get an indication of their house loan rates. As there are different types of home financing, request the typical conventional home mortgage rate.
Now you're ready to make appointments with several home mortgage companies. These are no obligation visits where you will be ';prequalified' for your home mortgage loan. When making your appointment, ask what information should be brought along. Be sure your financial information is accurate and up to date as inaccuracies can lead to a less favorable interest rate.
After the lending officer reviews you mortgage application, he/she will explain:
- The different types of home mortgages.
- The type of home mortgage best applicable for your purchase.
- The applicable mortgage interest rate.
- The approximate amount you can borrow.
- The estimated cost for property taxes.
- The estimated cost for home insurance.
- The monthly payments for your new home mortgage.
- The length of time the interest rate will be guaranteed before closing.
Types Of Home Mortgages & Home Construction Loans
There are three basic types of home construction financing:
- Conventional House Mortgages
- Home Construction Mortgage Loans
- Home Bridge Loans
A Conventional House Mortgage is applicable when the home mortgage loan closing takes place before the home construction begins. Your home mortgage company will designate which mortgage title company will work with your home builder to disburse the periodic progress payments as the home's construction advances.
A Home Construction Mortgage Loan is applicable when the home mortgage loan is closed after the home's construction is completed. Your home mortgage lender or a designated mortgage title company will disburse periodic progress payments to your builder as the home's construction advances. The actual closing of the home mortgage takes place after the house construction is completed. Your home lender then converts the home construction loan over to a conventional home mortgage.
A Home Bridge Loan is applicable when you own your home and are building a new home. Your mortgage lender will use the equity in your present home for the new home down payment. It is assumed your existing home will be sold before your new home is completed, at which time your lender will convert the home bridge loan over to a conventional home mortgage.
If you're existing home is not sold before your new home's construction is completed, you will continue to make monthly payments on your existing home mortgage and pay only the monthly interest on the home bridge loan.
Upon the sale of the home, your home bridge loan will be converted over to a conventional home mortgage. There are some variations to this procedure, thus it would be wise to clarify this point in the early stage of inquiry.
Note: Financing for modular and panelized homes is completed as a typical, conventional home construction. Mortgage financing for a mobile home is often available at the mobile home dealership. Therefore, it would be prudent to shop around.
Mortgage Calculators You'll find several mortgage calculators sites listed in our 'Building Marketplace' . You can use the projected figures calculated by your mortgage lender for principal, taxes, insurance, interest rates and your home mortgage limit, and enter these figures into the mortgage calculator. You can find the cost of insurance premiums, municipality taxes or a differently priced home by entering these new figures. The mortgage calculator will tell you what your payments will be and/or how much more/less money can be spent on your new home
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