To get a construction loan you’ll need to provide your lender with building plans, a construction schedule and the estimated costs.Aly J. YaleBuilding a home comes with many perks. You can pick your lot, customize your floor plan and build the home of your dreams. Plus, with low housing supply and higher mortgage rates keeping many homeowners from listing their properties, it can also make your home purchase easier on the whole—no scouring listings or bidding wars necessary.
Unless you have a savings account flush enough to foot the entire home-construction bill yourself, you’ll usually need a construction loan to bridge the gap. A construction loan is a type ofthat can fund the process of building your house—from the buying of the land and materials to covering the cost of the permits and labor.
Are you thinking of building a home from the ground up? Here’s what you should know about construction loans before diving in.Home construction loans work differently than traditional mortgages. First, you’ll need to provide yourwith building plans, a construction schedule and estimated costs. All this will be used to set your loan amount.
“Draws compensate subcontractors and general contractors for the work they have completed during that period,” says Benjamin Kadish, president of Maverick Commercial Mortgage. “As the construction progresses, the loan amount increases with each construction draw, until it reaches the total promised by the lender.”