While others prefer to buy a house that is ready for occupancy, some prefer building their homes from scratch. It is because the idea of building your home finally and call it your own is the best thing that you could ever achieve in your lifetime. However, doing such would mean you need to have a tremendous amount of money. But you don’t have to worry about that since you can always apply for a construction loan primary residence to fund your home construction.
But what is construction loan primary residence? And what are the things you need to consider before applying for one?
What is a Construction Loan?
There are two types of construction loans, the Conventional Construction-to-Permanent loan, and the Stand-alone construction loan. If you choose to apply for a Construction-to-Permanent mortgage loan, you will have the opportunity to loan the combined amount of the land and construction cost.
During the construction phase, you will only have to pay the interest of the loan; this gives you time to focus all your resources in building your dream home. However, the lenders only allow limited time up to 12 months to finish the house construction from the date of funding.
The Stand-alone construction loan, on the other hand, gets two separate closing fees. The lender will charge the borrower for a closing cost before the construction and another closing cost for the permanent mortgage. Also, the interest rates for Stand-alone construction loan can change, and the borrower won’t have control over it.
Things to Consider Before Applying For Construction Loan
Have an Estimate
Before applying for the said loan, you must already have the expected cost you are going to face for building your home. To determine the estimated total amount of the construction process, you might want to use a house cost estimator. With this, you will have an estimated amount of construction costs based on where you’re building. Usually, the estimate report includes construction costs, applicable tax benefits, the needed down payment, and other related calculations.
Look for a Reputable Builder
There are lots of builders out there that you can choose from; however, not all of them can deliver excellent results. Make time to research the most reliable builder in your town and check the reviews from their website if they have one. Ask your friends and get referrals. Also, we highly recommend that you only hire a builder that is also a member of the National Association of Home Builders (NAHB).
Build a Resaleable Home
Even if you have put tremendous effort in building your home and it created a sentimental value, you still must have to be mindful of its resale value in the future. There might come a time that you need to move from another place or state due to various reasons such as work-related issues, and you don’t have a choice but to sell your house.
Try improving your outdoor landscapes, beautify your kitchen, and install patio or firepit in your backyard. These simple addition can significantly increase your home’s market value.