Building your dream home is an exciting way to become a homeowner, but in terms of loans, it’s not the same as purchasing an existing property. With new home construction, a traditional mortgage won’t cover the costs, so you have to explore alternatives dedicated to construction. Here are a few basics about these financing options for first-time buyers.

3 Facts About New Home Construction Loans

1. There Are Two Types

Lenders provide two types of new home construction loans: construction-to-permanent and stand-alone construction. The first covers your construction costs, and once it’s completed and you move in, the remaining borrowed money is converted into a traditional mortgage with adjustable terms and rates. A stand-alone construction loan covers only the construction costs, and you’ll have to get a separate mortgage loan from the lender when you move in.

2. Have Financial Proof Ready

Lenders don’t simply want to know you can pay for the loan directly. If something changes throughout the construction process, such as adding new amenities, altering home design, or investing in expensive fixtures and finishes, they’ll want proof that you can cover these costs. New home construction loans can be considered extremely high-risk, so don’t make any changes you can’t back up to keep the original loan terms in place.

3. Lenders Want Assurance of Construction

Since there’s no existing home as collateral, lenders want to know that you can complete the project. To prove this, it’s best to already have a general contractor, architect, and other construction professionals on board, so they can advise on timelines and other aspects of the project to give the lender assurance. It’s also beneficial to have a team ready, so you can begin immediately when the loan is approved.

Angel Construction has proudly helped homeowners and first-time builders in High Point, NC, bring their dreams to life for over 30 years. Whether it’s new home construction or home improvement projects, they believe in collaborating with their clients to achieve lasting results. Their skilled team takes all the necessary steps to complete projects safely and on time. Call (336) 382-1522 to schedule an estimate. Visit their website to explore their finished projects and learn more about their services.