Some individuals would rather build their home than buy an existing one. Even though buying a house comes with a lot of perks, nothing can beat the satisfaction that building your home can bring. Knowing you’re there from start to finish is an experience like no other.
Whether you plan on getting a Construction To Permanent Loan Texas or a Stand-Alone Construction Loan to start building your dream house, there are things you need to consider to make the most out of the experience. Here are 8 Construction Do’s and Don’ts to remember.
Do check the pros and cons and risks of getting a construction loan before making a decision.
Like any other loans, construction loans has its perks and downsides. Make sure to check the risks that come with the two types of construction loans and see whether it is the right time to build your home.
Don’t forget to check all requirements.
Lenders have more conservative requirements when it comes to Construction loans. You’ll need to prepare at least 20% down, and a FICO score of at least 680 to qualify. Requirements will still depend on your lender.
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Do know when to apply for a Construction-To-Permanent Loan.
Such construction loan type is perfect for individuals who want to lock in interest fees and already have a definite timeline in mind and straightforward construction plans. Once construction is complete, it will convert into a permanent mortgage.
Don’t settle on the first lender who approves your construction loan application.
Not all lenders have the same reputation, plus they have different terms and requirements. Make sure to shop for lenders, do your research, and check for their experience, credentials, and reviews.
Do be patient during the application process.
Construction loans take more time than other loan types. You’ll need to provide more documentation and prepare more paperwork, not to mention more money when securing the loan. So, just be patient, communicate promptly with your mortgage lender and be ready to provide what they require so you can get approved asap.
Don’t apply for more credit lines during the application and construction stage.
Even if you get approved for a construction loan, it would be best to postpone any unnecessary new debts. Remember that during the construction period, you only pay for the interest, giving you enough time to save up the principal loan amount. If you take additional loans, this can hurt your DTI ratio, putting your home at risk.
Do stay at your current job and employer.
It is vital that you stay at your current job while they construct your house. This will boost your lender’s confidence knowing you’re capable of paying the loan after the construction stage.
Don’t forget to find the right builder for your home.
Like lenders, no one builder is the same. Don’t settle for cheap fees and sweet talks. Ask for referrals, do some background check, ask for all costs involved and check for their accreditation before hiring one.
Applying for a construction loan requires a higher qualification standard, meaning you need to make a good impression for you to get qualified. However, these are short-term loans with very flexible terms that lets you build your dream home just the way you like it. It may require a greater commitment, but it will all be worth it once you finally see the house of your dreams standing proudly before you.