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Home Construction Loans

Home construction loans are popular forms of home loans. You can use such a loan to build your dream home at an affordable cost. At present, many lenders are offering home construction loans.

About home construction loans

Home construction loans are availed to construct or build apartments or buildings. These loans are offered to both individual and institutional borrowers. Real estate companies secure home construction loans for building apartments on a large scale and individual borrowers take them out for constructing their personal residences.

In basic terms, a home construction loan is any type of loan which is utilized to finance any form of construction. According to the United States Financial Services Industry, nevertheless, the expression is used to delineate a variety of loans tailored for construction activities. These loans typically have characteristics like interest reserves where the repayment is contingent on the completion of the project. Hence, the essential characteristics of these loans are different from that of the conventional loan programs just to guarantee that the project is finished in order that repayment can start to happen.

The expression “home construction loan” is recent in the United States. In the United Kingdom, these loans are known as “self-build mortgages” or value-added loans. Home construction loans are available in two types: variable rate home construction loans and fixed rate home construction loans.

Regardless of which city you live in, you can get a home construction loan from a number of banks and other financial institutions. There are construction to permanent financing programs where the home construction loan can be switched into a home mortgage loan once the certificate of occupancy has been given to the borrower.

Home construction loans are usually offered in the following forms:
  1. 15 year fixed
  2. 30 year fixed
  3. 1 year ARM
  4. 3/1 ARM
  5. 5/1 ARM
  6. 7/1 ARM
  7. 10/1 ARM
  8. Interest-only loans

Purposes of home construction loans

A home construction loan can be used for different purposes. You can use it for building a new home, renovating your existing home or purchasing a lot. It can also be used for permanent financing of residential properties. Given below are some of the reasons why people go for home construction loans:

  1. Building or constructing homes from the beginning through construction financing
  2. First time home buyers who are searching for newly constructed homes use these loans
  3. Home construction loans can also be used for buying a lot or a newly constructed house from a builder or developer
  4. Builders or construction companies take these loans and also refer home buyers to these lenders


What are the advantages offered by home construction loans?

A home construction loan typically offers the following advantages to the borrowers:

Convenience

With a home construction loan, you can purchase the land, close your loan and get permanent financing. As soon as the construction is over, you have the option of raising or reducing the loan amount or even shifting to another loan type.

Simplicity

A home construction loan is a form of dependable financing with a single application, a single evaluation and a single approval procedure.

Flexibility

Home construction loans are available in both adjustable rate and fixed rate forms. So there is a lot of flexibility.

Lock options

You have the opportunity to lock loan rates at the time of new home construction for a maximum period of one year. In this way, you can safeguard yourself from the ups and downs in the financial market.



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