You need a special type of loan if you want to finance the construction of your very own dream home.
You've decided to build a new home. But rather than buying from a new home developer you want it to be custom built. That means you're going to have to finance the actual building process. And most likely you're going to need to apply for a construction loan.
Construction loans differ slightly from regular mortgages. To help you understand those differences, we've listed the answers to your most common questions:
What's the Difference Between a Construction Loan and a Mortgage?
A mortgage is a lien against a real property given by a buyer to a lender as security for money borrowed. A construction loan is a short-term loan used to finance the cost of construction.
Do Construction Loans Carry the Same Interest Rates As Mortgages?
Unlike mortgages, construction loans aren't meant to be long term. They are usually set up as variable-rate loans priced at short-term interest rates. Typically, a schedule is set up to enable funds to be drawn as needed to finance the various stages of construction. Interest is charged on the money that is disbursed. And during the time your home is being built, you usually make interest-only payments on the loan.
What Is Construction-to-Permanent Financing?
By applying for construction-to-permanent financing, you can get a short-term construction loan that automatically converts into a permanent mortgage loan when your home is built.
 | As with any building project, the costs of building a new house can get out of hand quickly. In estimating the cost of building a new house, you should be realistic about what you want to build and where you want to build it, and whether or not you should act as general contractor or hire a contractor. |
 | For many people, building a home comes with horror stories of things gone wrong. If you are looking into new home construction, steer clear of the most common mistakes so you can come closer to your own dream home. |
 | With an accurate timeline for building your own home, you can better work with contractors and vendors to meet your budget without any surprises. |
Part of the final phase of building a new home is to go over your "punch list." A punch list is a list created at the end of construction that shows what needs to still be done or what needs to be repaired on the new construction. The homebuyer and the contractor create this list. |
Buying new home construction is a little different than buying a resale home. Here are three important factors to keep in mind. |
