You pay interest only until construction is complete, then switch to monthly mortgage payments You pay your mortgage each month after securing the loan Residential construction loans are unsecured loans since your unfinished home can’t be used as collateral Mortgages are secured because your home is used as collateral Purchase a home that is already built or is being built by a construction company, usually in a neighborhoodįunding to have your home custom built, typically on your own land, through a private construction company you hireĬan be fixed or variable depending on your lender With residential construction loans, funds are disbursed to you and the builder as progress is made on the home, not all at once like a traditional mortgage. Term can vary based on your building timeline. Here are some primary differences between the two loan types: While you’re likely familiar with a traditional home mortgage, information about a residential construction loan isn’t generally common knowledge. These loans are short term compared to a traditional home mortgage and the funds are paid out in stages as work is completed on your home. We have experienced Mortgage Lenders in Virginia, Tennessee or North Carolina, ready to assist you with financing your new build.Ī residential construction loan provides you with the funding needed to build your dream home. That’s when you need to secure a residential construction loan.Īt First Bank & Trust, we offer flexible financing to cover your home construction needs. Sometimes you’ll find the perfect home that’s move in ready, while other times, the only way to get what you truly want is to build a new home from the ground up.
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