Unless you are Bill Gates or Warren Buffet, you are probably going to need to take out a loan to build your dream home. There are a number of different routes that you can take when you go to get your loan, and each type of home loan comes with its own list of positives and negatives. It’s important to consider each type of loan from a number of different people and institutions before you pull the trigger and get that cash. There are different sets of requirements that come with each type of loan as well, so you need to be careful about what you agree to do with your new home.
FHA Loans
FHA loans are the type of mortgage that most people are going to end up using because they are the easiest to obtain. When you go to apply for this type of loan, you will need to provide the normal loan application materials such as current debt levels, credit score and proof of income. If you are pre-approved after providing these materials, you will then be given a maximum amount that you can spend while you build your home. It is vitally important that you do not exceed the maximum loan amount while you build your dream home.
VA Loans
VA loans are basically a version of FHA loans that give special treatment to veterans. VA loans usually come with a lower rate of interest, but the catch is that you have to make sure that the home follows certain energy efficiency guidelines.
Adjustable Rate Loans
Adjustable rate loans will allow you to get more money up-front than any other type of loan. Since you will be able to qualify for more cash, it is much easier to make sure that you can fit your dream home inside of your loan’s allowed budget. These loans will come with low interest rates at first, but they will begin to rise as the years go by. It’s important to make sure that you will be able to handle the increased interest payments in the future with this type of loan.
Conventional Loans
The last type of loan you can look at when it comes to building your dream home is a conventional loan. These kinds of loans will give you the ability to have more control when it comes time to pay for construction costs, but they are usually not the best idea if you are purchasing your home from a tract builder.
Stay Within Your Budget
The most important thing to remember after you get your loan is that you need to stick with your allocated budget. You will probably have to get rid of a few ideas or tweak some of the nicer things that you were going to place in the home, but building your own dream home is still the best route to take if you want to live in the perfect house.
Brent Taylor writes issues related to mortgage loans and financial matters. He writes for Mortgage Loan, a site that provides daily news and articles since 1995.