In today's competitive housing market, finding the perfect home can feel like searching for a needle in a haystack. But what if you could build your dream home from the ground up, tailored exactly to your needs and preferences? Construction loans make this possible, and they're more accessible than you might think. Let's dive into the world of construction loans with insights from Stacy Schlicher, a seasoned lender at Union Home Mortgage.
Debunking the Down Payment Myth
One of the biggest misconceptions about construction loans is the down payment requirement. Many believe you need a hefty 20% down payment, but Stacy Schlicher sets the record straight: "It's a myth out there that you have to have 20% down on a construction, and that is not true. At Union, we have 5% down, and we even go as little as 0% down [for veterans]."
This flexibility opens doors for many potential homeowners who thought building was out of reach. With down payments as low as 5%, and even 0% for eligible veterans, the dream of a custom home becomes much more attainable.
The Financial Advantage of Building vs. Buying
While the upfront costs of building might seem higher, it's essential to consider the long-term benefits. Stacy points out, "If someone is to buy an existing home, not exactly how they want it, and they close on that house and do rehab work on it, it's going to be expensive."
Building new means you get exactly what you want from the start, avoiding costly renovations down the line. Plus, new homes often require less maintenance in the early years, saving you money and headaches.
Another financial perk? During construction, you only pay interest on the amount drawn, not the full loan amount. This can significantly reduce your payments in the building phase.
Navigating the Construction Loan Process
The process of obtaining and using a construction loan is straightforward:
Choose your builder (the lender will ensure they're qualified)
Get loan approval
Close on the loan (one-time closing for land purchase and construction)
Begin construction with interest-only payments
Move in and transition to a standard mortgage
Stacy emphasizes the importance of financial stability during this process: "Keep your job, don't purchase large items, save your money." This ensures a smooth transition from construction to permanent financing.
The Impact of Credit Scores on Construction Loans
Your credit score plays a crucial role in determining your interest rate. As Stacy explains, "You can get a construction loan with a 660 credit score. However, you're not going to get the same interest rate as somebody with a 760 credit score."
If you're considering a construction loan, it's worth taking steps to improve your credit score before applying. Even a small increase can lead to significant savings over the life of your loan.
Support Throughout the Building Process
One of the standout features of Union Home Mortgage's construction loans is their concierge service. "We have a concierge department for our construction loans… making sure everything runs smoothly and getting their draws and getting things moving all the time," Stacy shares.
This dedicated support ensures that both you and your builder have guidance throughout the construction process, making what could be a stressful experience much more manageable.
Conclusion: Is a Construction Loan Right for You?
In a market where finding the perfect existing home can be challenging, construction loans offer a compelling alternative. They provide the opportunity to build a home that meets your exact specifications, often with more affordable down payment options than you might expect.
While the process may seem daunting at first, with the right support and guidance, building your dream home can be an exciting and rewarding journey. You get to make every decision, from the layout to the finishes, ensuring your new home is perfectly tailored to your lifestyle.
Ready to explore building your dream home? Contact us to learn more about construction loan options tailored to your needs. With flexible down payments, expert guidance, and the chance to create a home that's uniquely yours, a construction loan could be your key to unlocking the door to your perfect home.
Ready to build your dream home? Contact us today to explore your construction loan options and start turning your vision into reality!
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