A lot of people reach a point where they decide that building and decorating their own home is the next step in an adventure called life. After all, having a home in which you have engraved a part of yourself can bring a lot of joy personal sense of accomplishment. Putting together a plan to build that work out the room you’ve always wanted or maybe that special little home office can be fulfilling and motivational. It’s no secret that building your own home is expensive. Fortunately, there is a way to help you advance with your plans. Although it can be difficult to convince a lender to loan you money for something that hasn’t been built yet, it is possible to get a construction loan.
What is a construction loan? A construction loan is a short-term loan that’s supposed to cover the expenses of your project. Getting it requires thorough planning and high points which you must present to the loaner. You’ll need a detailed construction plan along with a realistic budget while assuring the loaner that the project is a small risk. Usually, the more experienced builders keep a sort of “blue book” in which all of the details mentioned above are included.
Now, let’s discuss the down payment. It’s no secret that down payment plays a major factor in any loan, but in the case of construction loans, it can put quite a big strain on your budget. You can expect a huge percentage (up to 25%) to be added as down payment. The main reason why it is so, it’s that unlike traditional loans, construction loans are viewed as high-risk investments in which the loaners want to make sure you see your project through.
First, you must choose a location. Owning the lot where you plan to build your home can be potentially helpful for you to get the loan, otherwise, the down payment percentage will increase exponentially. Getting a well-established building contractor with a good reputation for this sort of projects should be a priority. The reason for this is that going at it alone and planning to be in charge of everything can be viewed as a problem by the loaners because you have no experience in handling projects like this. If you can somehow present a detailed and convincing construction plan which demonstrates your skills and knowledge in the home-building business, then you might just get the loan.
Let’s sum up. While building your home can be an extremely gratifying experience, it’s no secret that you will have to jump through a lot of hoops to see your dream become a reality. So, before even thinking of going through with a project like this, be ready to put together a well-built project plan and get a well known, qualified home builder. In the end, it all comes down to your available resources. Your budget will decide the fate of your project, so start saving up so you can cover the down payment.