New Home Construction Loans
Obtaining new home construction loans may not sound fun. But getting the cash to start building a new home can be a snap with all the options available in today's market. At first glance, new construction may seem tricky to finance but delve deeper and see there is not much to fear. While this type of loan is different than the standard mortgage paperwork one would fill out, it shares some similarities. It's the differences that merit further research and learning more about them can aid in securing that important loan.
The first step in dissecting the puzzle of new home construction loans must be defining them. New construction loans are often referred to as story loans since the banker or loan officer must be privy to the story behind what is to be built. He wants to know who owns the property, what the value of the property is, what you want to build, how long it will take to build, who will build the house, how much money you want and how much money the property will be worth upon completion. Basically he wants a play by play of exactly what will happen with his money and more importantly when he will get it back.
There are two basic types of loans to get when building a new home in Virginia. The first new construction loan, construction to permanent loan, involves closing only once. The good news is buyers close only once so that means paying closing costs only one time. It may be less worrisome as homebuyers know they have a permanent mortgage already waiting at the end of the construction phase and usually less paperwork is involved. The bad news is shopping around for the best loans and lock options may not be fruitful because this option has, for the most part a narrow lineup of choices.
The second type of construction loan is where buyers close twice. In simplest terms, it is a mandatory refinance after building a new home has reached completion. On the plus side, buyers can choose from more permanent loan programs than the first option. Fixed rates can be locked in to avoid payment increases. These loans tend to suit large custom home builds well as construction cost overages can be handled efficiently and accessing money is a bit more flexible. On the negative side, complications may arise from the onset. Be prepared to read and sign lengthy paperwork entailing every aspect of the transactions. And of course, it goes without saying that you'll be forking it over for closing costs twice if this route is selected.
Deciding what's best for you when embarking on building a new home can be tough so be sure to have all the facts before making any decisions. Know that with so many new construction home loans out there, the right one is just waiting for you. The best part about signing those new construction loan papers is knowing they are a means to securing that dream home in Hampton Roads.