Choosing the right type of financing is vital for a building project. A long-term loan will have a longer term and a higher financing amount, but a long-term loan also has more risks to consider during the repayment period. This is because longer term loans have a higher monthly burden, and a higher loan amount will mean a higher risk during repayment. Here are the main features to consider when choosing a loan: 주택담보대출
Land loan
A land loan is the best option if you need a large sum of money for a long-term construction project. However, land loans are notoriously difficult to qualify for and come with unfavorable terms. Interest rates are typically higher than those for other types of loans, and they often require additional borrower commitments and underwriting. Here are some tips to help you choose the best land loan for your construction project.
A land loan is similar to a mortgage. The lender will evaluate your financial documents and perform a credit check before disbursing the loan proceeds. Then, the buyer will pay back the lender over a fixed term, usually ten or twenty-five years. Some land loans are structured as balloon mortgages with interest-only payments for a specified period. In these cases, you will need to plan for the balloon payment before you take out a land loan.
Construction-to-permanent loan
When you need a temporary source of financing for a home construction, a construction-to-permanent loan might be a better option than a stand-alone construction loan. With these loans, you can take advantage of a 12-month interest-only period before making the final decision about a permanent loan. In addition to this, you don’t have to pay principal payments during construction, giving you more time to spend or save.
While a construction-to-permanent loan is available for both new and existing home construction projects, down payment requirements are usually higher. In general, a construction-to-permanent loan requires a 20% down payment, while a traditional construction loan requires 3.5 percent down. The down payment requirement will depend on the LTV ratio of the construction loan and the value of the completed property. If you own land, this down payment can be used to pay for the loan.
FHA 203k rehab loan
An FHA 203k rehab loan is designed to give the buyer the money they need to make extensive repairs and renovations to their home. The FHA approves lenders who offer this type of loan and require very little down payment. These loans are usually used for major renovation projects, such as converting a single-family home into a two, three, or four-unit property. There are many benefits to a 203k rehab loan.
This type of loan is backed by the Federal Housing Administration and can be in the form of a 15-year or 30-year fixed-rate mortgage. It may have more flexible qualifications and is paid off over many years with affordable mortgage premiums. The qualification requirements may be more relaxed than those for a traditional mortgage loan, but you need to look for a lender with the right experience and reputation. Good building loans are important for FHA 203k rehab loans.
Conventional mortgage
Before you apply for a conventional mortgage for your new home, it’s important to know your credit score. A lender will look at your credit score to determine how risky you are, and a higher score means you’re more likely to make payments on time. Credit scores are ranged from 300 to 850. A credit score of at least 620 will likely qualify you for a conventional mortgage. Having a lower credit score, however, may prevent you from qualifying for a conventional mortgage.
Bank of America offers competitive rates on conventional mortgage loans. This major financial institution has over 4,300 branches nationwide, making it convenient for homebuyers to get the financing they need. You can apply in person or online, and if you have an existing account with the bank, you can even apply for a mortgage loan at a branch near you. As an added bonus, you can take advantage of any existing discounts you’ve accumulated over the years. For example, you could get a $200-$600 discount on your mortgage origination fee if you’re an existing customer.