The following is a guest post…
Building a new home can be an exciting project for you and your family, and it might even be a good financial decision. However, make sure you take the time to learn about the financing process before you begin. If you need to take out a loan for your new construction, taking the right first steps can save you money and frustration.
Getting Your Loan
Lenders want to loan people money. They only make money when they collect interest payments from mortgages. However, lenders can also lose money if they make loans to people who are unable to pay them back. Depending on what you are getting your loan for (home, auto, education, etc.), you will want to look into specifics of your particular loan. If you plan to get a construction loan to build a loan, you may be asking yourself “How do construction loans work?” Construction loans do work a little bit differently than regular home loans. While the house is being built, interest is charged only on the amount of money used. Then, when the home is completed, you pay interest on the entire cost.
You Can Shop Around For The Best Rates
You do not have to take the first loan offer you get. Your own bank might be willing to lend you money, but they may not be able to offer you the best interest rates. Some lenders have special programs that can save you a lot of money over the course of several years. Don’t be afraid to talk to a few different loan officers from a handful of banks.
The first thing to know about how building loans work is that you may have to be patient. You may think you have collected dozens of documents that prove you would be a good person to lend money to, and then your loan officer might come back and ask you for even more documentation. You cannot get frustrated if you want the loan.
The second thing that will be helpful are your own organizational skills. When you want to qualify for a loan with a good interest rate, you might have to present all sorts of documents. These could range from bank statements to divorce decrees. If you can produce these documents quickly, you can get your loan faster.
Check The Terms
Make sure you understand how the loan works. After all, you will be making a long-term commitment. For example, be sure that you understand if your loan has fixed or variable terms.
Improve Your Credit
A good loan officer should have techniques to help you improve your credit very quickly. Sometimes the difference between a few points in a credit score can save you hundreds of dollars on your loan each month.
Make Sure You Can Afford The Loan
You will never be happy with any new construction process if you cannot afford it. Be realistic about your ability to make timely payments.