It is everyone’s dream to have a place to call home. For others, it is an apartment or a condominium but many wants to have a house. It is especially true to those who are starting their own families or is planning to have one. However, the cost of building a house is prohibitive in the United States which makes having a home remain a dream for many families.
There are thousands of families who prefer to live in different housing alternatives or rent since they cannot meet the cost of purchasing or constructing one. But when it comes to construction loans Houston, having the home of your dreams is possible. You can go for different types of housing loans to purchase one, but if you prefer to build, construction loans are also available.
In general, a construction loan is a type of loan given out by different lending companies so you can either build a house or renovate an existing one. The main difference between this type of loan and traditional loans is in terms of loan money. For conventional loans, the company covers the cost of the home in one lump sum payment; on the other hand, construction loans are given to the builder in installments. It means the bank pays depending on the phases finished during construction. Eventually, the total cost is transferred to the owner when the project is already completed.
If you are thinking of taking out a construction loan, you need to learn about the different types first and decide which one is best according to your plans and needs.
Construction to Permanent Loans
Construction loans are recommended if you have a fixed construction plan as well as a concrete timeline. Construction to permanent loans allows the bank to pay the builder depending on the work completed. Once the installation is done, the cost is converted into a mortgage. This particular type lets you lock interest rates during closing which allows you to have regular payments.
Construction Only Loans
Construction only loans are recommended to those who are expecting cash at the end of the construction. What happens here is that the credit has to get paid off once the building construction gets done. If you are expecting to sell your current home, then this is good for you or if you are planning a large sum of cash. However, if you are unsure about your resources, then it is better to choose a different type. The hard thing about this is if in the future you need a mortgage to cover all costs then you have to find the lender and ask for approval for the second time.
Renovation Construction Loans
This type of construction loan is recommended if you are purchasing a fix-upper. For cases like this, you can take advantage of specific government programs. The expected cost of any renovation you are planning to do on your property gets wrapped up in the mortgage together with the purchase price.
If you are looking forward to taking a construction loan, feel free to visit our office so we can help you choose which type of construction loan is best for you and your needs.