How Do Home Construction Loans Work?
Home construction loans are specialized loans designed to finance the construction of a new home. These loans differ from traditional mortgages because they focus on the construction phase, providing funds in stages as the project progresses. Borrowers typically need to meet specific requirements to qualify, which may include a strong credit score, a detailed construction plan, and cost estimates from contractors. Unlike a traditional mortgage, the approval process for this type of loan involves multiple steps. Lenders often conduct thorough assessments to ensure that both the borrower and the construction project meet their criteria. Home construction loans also have unique repayment terms, often starting with interest-only payments during the build and transitioning to full repayment once the home is completed. Types of Home Construction Loan There are several loan options available to finance a home construction project. The most common are construction-to-permanent loan...