How to Finance a Newly Constructed Home
Saturday, December 28, 2019, 6:00 AM | Leave Comment
When you’re looking for a house, you have lots of options for how you can go about affording it.
A new home offers you more loan options than purchasing an older home.
Here are some of the ways that you can finance your newly constructed home.
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Traditional Loan
A conventional loan is always an option. It works to your benefit to put down at least 20% so that you don’t have to pay for mortgage insurance every month. This is the lender’s means of ensuring that you won’t be a bad investment for them. There may also be additional fees and closing costs added to your loan. Obtaining this type of loan is good if you don’t have any other options and the interest rates that you can receive are low.
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New Construction Loan
A new construction home loan is mainly for those that are working with a general contractor or building their home themselves. The point of these types of loans is to give you an infusion of cash upfront in order to get the construction process started. Once constructed has been completed, your loan would convert to a standard fixed term loan. The benefit of this type of loan is that it gives you greater flexibility in the amount of money that you can borrow.
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VA Loan
The good thing about qualifying for a VA loan is that you don’t have to put any money down. You only need to be a veteran in order to qualify, but this offers you a chance to get into a new home where you might not have been able to afford one previously. Rates also tend to be lower for new homes construction because they are less likely have problems passing an inspection. Another bonus is that you won’t have to pay for mortgage insurance and your closing costs will be reduced.
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FHA Loan
Another good option for financing your new home is through a FHA loan. This type of loan allows you to put as little as 3.5% down. You can still qualify even if you’ve had credit problems in the past as long as your credit score is still within a specified range of moderate to good. On the downside, this type of loan is capped at how much you’re allowed to borrow. The purpose of the FHA loan program is to help families that are on the lower income side.
Financing your new home means that you need to look at all of your options. Use these tips to help you find the right type of loan for your individual situation.
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Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information, contact Brooke via Facebook at facebook.com/brooke.chaplan or Twitter @BrookeChaplan
