Construction Home Loans

If you’re looking to build your home, Guardian Mortgage can help you lay the strongest financial foundation possible.

A Construction Loan, also known as a residential construction loan, is a mortgage loan that funds the building of a new home or residence. The construction loan is closed for the total loan amount, and the funds are paid out over a period of time as the home or residence is completed.

These days construction loans may be harder to qualify for than a traditional loan. This is because the bank has no collateral in the transaction—the funds of the loan aren’t used to buy a finished product. As a result, construction loans are typically interest-only. They usually have a term of one year or less and a higher interest rate to reflect the higher risk of loaning money without a finished product.

To try to protect themselves from this problematic outcome, banks often impose strict qualifying requirements for a construction loan. These usually include the following provisions:

A Qualified Builder Must Be Involved. A qualified builder is a licensed general contractor with an established reputation for building quality homes.

The Lender Needs Detailed Information. This includes floor plans, as well as details about the materials that are going to be used in the home.

The Home Value Must Be Estimated by an Appraiser. However, this is a little trickier since the appraiser has to base the value on a best guess as to the final version of the home and where the market will be several months in the future.

You Will Need to Put Down a Large Down Payment. Your assets are also considered to reduce the risk for the lender. Typically, 20% is the minimum you need to put down for a construction loan – some lenders require as much as 25% down. If you default on your construction loan, the lender can go after your assets to repay the debt

This is how a Construction loan is paid:

– Construction loans are paid out in increments, called draws. These draws are included in the budget created during the loan application which are tied to construction process.

– Lender will send out an inspector to verify that the work pertaining to the draw was performed.

– Once your home is complete and you have been issued a certificate of occupancy, the lender will release the remaining funds from the loan to pay the final invoices.

– Most lender will then require you to take out a standard home loan to repay the construction loan. Some construction loans are set up to automatically roll over into a standard mortgage with the same lender, while others allow you get new one. d out over a period of time as the home or residence

Benefits for Construction Loan:

•  Available for the construction of your primary residence
•  Fixed rate and ARM loans available
•  Conforming and Jumbo Loan amounts available
•  One-time closing fee with only one set of closing costs
•  Interest-only payments during construction

Our Certified Mortgage Planner Specialists will guide you through each stage of the process and provide you with expert advice along the way. We are committed to making the home loan process clear, informative, and simple. At Guardian Mortgage, we understand that buying a home will be one of the biggest purchases of your life. That’s why we are committed to providing you with the information you need to make well informed decisions.

When you are ready, simply Apply Online, Request Personalized Rate Quote or call us at 703-349-1084 to speak with live person.