What are construction loans?

Construction Loans - Construction loans are given for the construction of a new dwelling. These loans can be obtained for Residential or businesses. Many times the construction company’s themselves will finance the construction loans they do. If you need to find your own financing it is important to check around and get the best interest rate you can for your money. There are many financial organizations you can apply at. Banks offer pretty good rates most times if you have good credit be sure to read the fine print. Find out what kind of closing cost you will be required to pay and if there will be any other types of fees included that are up front or included in the loan.

There are many questions lenders will ask when you are applying for construction loans such as; where is the property located? And what type of construction are you planning? They will want to know if you already own the land or do you need to still purchase the land. Many times with construction loans the lender will need to know if this is going to be your primary residence or secondary.
They will also want to know if you have already chosen a contractor and when you plan to begin construction work. Then you begin the work of figuring out what you estimate the construction is going to cost and how much of a down payment you are planning to provide for the construction loans.

When applying for construction loans there are many to choose from such as construction loan only or Construction to Permanent Loan - Interest Reserve and construction to permanent interest only loan. A little homework will be required when making the decision to obtain construction loans. Your next decision will be to decide what term you want to finance your construction loans. There are few choices here as well. 30 year, 20, or 10 are the most common of the terms. Remember when deciding on the term if you pay on a short term such as 10 you will be paying a higher monthly rate however you will have paid less interest over the term of the loan. A 30year term will save you money on a monthly basis but in the long run will cost you the most in interest.

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