Have been looking for “Home Builders in Lake Travis” lately? Since you have decided to build your dream home, there are tremendous factors that you need to consider and take care of to ensure that the results come out just the way you have imagined. Whether it is buying a home or building a new one from the scratch, there is going to be the process of borrowing the money from the right sources. There are going to be a lot of steps in building your new home, right from acquiring the land, finding the right builder, developing a plan, and finally securing the right funding. Now you need to decide that whether you will be opting for the home builders’ loan or a regular mortgage.
Whichever the choices that you decide, you must know both of them so that you make the right choices. Knowing the pros and cons of a home builders’ loan and a regular mortgage and which one suits your situation is crucial to understand. This article will help you out in knowing all the intricacies related to the builders’ loan and a mortgage. Once you know the difference, you will be able to take your decision ahead and finally start the process of building your home through the best home builders in Lake Travis.
What is a home builders’ loan?
To understand the meaning of a home builders’ loan or home construction loan is that it is a short-term loan that comes with a high rate of interest that offers you the finding to build your home. Thus, when you start building a home, you first consider buying land for it in any area. The majority of the home builders’ loans also cover the land price along with the cost of construction. Because of this, there is going to be more involvement of the lender as it is usually in the regular home loans process. The lender will propose to see your home plan, the budget, and the schedule. After that, it will be determined how much money you will be needing in the form of a loan.
After that you will be securing the loan and the lender is now supposed to pay the builder in decided intervals along with each phase of the construction. Also, the lender will keep a tab of the progress made in the construction before releasing any payment.
Before the entire project is completed, the only amount you will be paying is the interest. You will start paying off the loan when your home is completely done, and it will be just like how you make payments for the usual mortgage plans with a monthly schedule.
What is a regular mortgage?
A regular mortgage or conventional loan is not supported by any government agency, and you need to make a down payment and meet the income requirements to get the confirmation for the loan and then the limit set by the Federal Housing Finance Administration. Usually, you must have a credit score of at least 620 to get qualified for the mortgage as it decides your interest rate. Depending upon your status financially, and how much money you will be borrowing, you will have to make a down payment as low as 3% with the mortgage loan.
Key differences between Home Builders Loan and Regular Mortgage
• For a home builders’ loan, you will be charged only the interest amount while the construction goes on. If the entire amount is not used, the borrower doesn’t have to pay the complete interest amount. While in the case of mortgages, the borrower’s interest is charged on the whole amount of the loan.
• Home builders’ loans are short-term loans that usually last for a year or so. On the other hand, mortgages range anywhere between 5 to 35 years.
• Home builders’ loans are given right from the purchase of the land till its completion. It is not in the case of the regular mortgage as it does not usually offer the funding for the land purchase.
Therefore, once you understand how both the loans work, you can choose for yourself which fits better in your plan and go ahead with it.