Many people dream of building the house of their dreams, either from the ground up or by renovating an existing house. Some look at home building plans or plots of lands and imagine their perfect home nestled into the location. Others look at dilapidated or outdated homes and see the beauty in their bones. They just know they can turn that old house into a beautiful home.
These dreams don’t need to remain dreams, however. With construction financing, dreams can become reality. The financing process is different from a traditional loan and requires more steps.
Lenders have certain requirements and methods of disbursement specific to construction loans. For those who truly want to take their dreams out of their imagination and make them real, construction financing is the path home.
What Is Construction Financing?
Many people are familiar with traditional mortgage loans. A person purchases a pre-built home. The bank pays for the home, and the person is responsible for repaying the bank plus interest for the purchase. When they finish paying the bank, they own the house outright.
Construction loans, sometimes called “Self-Build Loans” or “Builder Loans,” are very different. With construction loans, you finance the construction or renovation of a home. The term of the loan is much shorter than a standard loan.
The loans cover the time during construction, generally for a year or less. The funds from