The process of finding the ideal house can be both enjoyable and challenging. With numerous aspects to consider, such as the style, size, and location of the house, people often struggle to know where to begin.
any buyers discover that certain houses fulfill most of their requirements, some meet a few, and others meet none at all. Rarely does a single house meet all the criteria, which means compromises must be made. Certain features that were once considered essential may need to be reevaluated as preferences rather than deal-breakers.
Feeling hesitant to give up any of your desires and needs? Have no fear, because if your dream home is unavailable or doesn’t even exist, you have the option of building a brand new house that fits all your criteria. However, in order to finance this construction, you must have knowledge about construction loans.
For construction loans, you typically make interest-only payments while the construction of the house is in progress. These loans also tend to have higher interest rates than typical home loans, as they are considered riskier for lenders.
It is a short-term loan that specifically covers the costs of building a custom home. This type of loan differs from a mortgage and falls under specialty financing. Once the home is completed, the potential occupant must apply for a mortgage to cover the cost of the finished house. Although we do not provide financing for construction loans, we can assist you in converting them into a permanent mortgage when the time comes.
As previously mentioned, construction loans are short-term in nature, typically lasting no more than a year. On the other hand, traditional mortgages are long-term loans with durations ranging from 15 to 30 years. With a mortgage, the borrower receives the full loan amount in one lump sum. Payments begin immediately upon loan closure and include both principal and interest.
Federal Housing Administration (FHA)-insured renovation loans, known as FHA 203(k) loans, provide financing for home renovation. This unique loan option allows borrowers to purchase a new home while simultaneously renovating it, with both costs consolidated into a single monthly payment.
Prospective custom home builders can consider construction-to-permanent loans as a financing option. Similar to construction-only loans, construction-to-permanent financing provides one-time funding for construction and then converts into a permanent mortgage.
A short-term construction loan typically lasts for one year and is specifically designed to cover the actual construction phase. However, we do not offer this type of loan due to their higher-risk nature.
An end loan is a conventional mortgage loan that a home buyer or, when constructing their own home, a home builder can apply for upon completion of the new property. Rocket Mortgage provides end loans as an option separate from the previously mentioned construction loans.
When constructing a home, it is customary to hire a general contractor responsible for overseeing the entire process. This individual ensures that various tradespeople, such as framers, tilers, wood floor installers, and painters.
