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Home Construction Loans-The Basics You Should Know of

The cost of constructing a home is quite high and it is never easy having the sum required for this lying around. This is the reason as to why many will turn to mortgages and the other types of loans to help them finance their homeownership dreams.

This said and done, it should be noted that where you happen to be looking at the a home building project and not a purchase of one, then you will not be advised to think of a mortgage and this is for the fact that lenders will not lend out money for something that doesn’t exist.

This however is no reason for you to despair as there is the alternative of going for the construction loans. In this post, we will be taking a look at some of the things that should be known of when it comes to the home construction loans.

Generally, a home construction loan as well referred to as a homebuilding loan is a kind of loan that is designed to pay for the costs that are associated with the building of a new home or house. Construction loans will be given for a specific time period, set terms such as one year as in most cases, and this is so as to be allowed time to get done with the construction of the home.

Having now completed the construction of the new home and now you want to pay off the construction loan, you may think of getting a new loan to pay off the construction loan. Such kinds of loans are referred to as the end loans. Having said this, it is to be however noted that the construction loans are available of different kinds and some of the most popular ones are the Construction-to-Permanent Loans and the Construction-Only Loans.

The Construction-to-Permanent Loans are the kinds that start out as financing to build the home. After the construction is done and you have the settled into your new home, the loan then converts and assumes the kind of arrangement there is in a traditional mortgage. But when it comes to the Construction-Only Loans, these will only cover the construction of the home.

Having said all these, it should be noted that when it comes to the homebuilding loans and mortgages for your homeownership needs, it is important to make sure that you are working with the right lenders like this company for your construction loans and mortgages for your loaning needs for the project at hand.