If someone wants to build a custom home or is looking to make renovations to a pre-existing home, there are financing options available. Determining which type of financing is best will depend on the borrower’s goals. Understanding the different options will help home owners make the best decision for financing their construction projects.
For construction on both new and existing homes, there are a few general ways to secure financing. Construction loans are great options that provide financing based on an appraiser looking at design plans and determining what the home will be worth when the work is completed. The only drawback to a construction loan is the requirement of another loan later in the process. Once the construction is complete, refinancing is required to convert it to a permanent loan.
New construction allows the borrower to create the home of their dreams without having to comply with a pre-existing structure. However, new construction isn’t always an option. If a borrower wants to be in a certain school district or area, new construction can be more difficult to achieve since the lots probably have existing homes on them. Renovating or expanding an existing home is a good option for home buyers who wish to live in a location where new construction isn’t possible. No matter which type of construction is completed, a construction loan is a great option because financing can be approved for up to 95 percent loan-to-value.
Hybrid Construction Loan Program
Another financing option for construction is the hybrid construction loan program. This program allows the borrower to acquire a construction loan and a permanent loan at the same time. This works for both new construction and renovations or expansions to existing structures and allows the borrower to lock in long-term interest rates up-front.
When looking for options to fund your construction project, there are multiple avenues to consider. Let the experts at Simply Home Lending help you through the process. They know what options are available and can help you make the best decision for your situation.