In the real estate industry, a mortgage is a very important thing because it’s what in most cases enables many potential buyers to acquire homes. A mortgage, therefore, plays a very big role as far as buying a home is concerned because, with the current prices of houses, it can be so difficult for many buyers to pay for homes in cash from their savings. So if you are planning to purchase a new construction home, you should first find out if you can be able to access a mortgage to finance your new construction home. For instance, if you were wondering if you can get a mortgage for a new construction home or not, the answer is yes you can get it. Indeed a yes is the answer to this question, can you get a mortgage for new construction? Therefore do not worry anymore about how you will purchase your dream home because a mortgage has got you covered. Although some lenders usually don’t give out such loans due to various reasons, you can still count on a new construction mortgage if you are looking forward to investing in a new construction property. You should start weighing options as far as the type of mortgage to take is concerned. New construction mortgages are divided into three categories as follows:
- Self-Build Home
This category refers to the situation where you opt to build your own home yourself. If you decide to build your own home you can go forward and get a new construction mortgage from any suitable lender. Remember your credit score is the most crucial factor when taking such a loan. In this category, you will be able to access two types of mortgages which are: progress draw mortgage and completion mortgage.
- Buying from a Builder?
Take Out refers to where you buy a home from a builder. Here you will buy after the builder has already built. After you have identified a new construction home you want to buy from a builder or developer, you can now go ahead and seek the services of a mortgage. This category only offers one type of Mortgage. A Completion mortgage is what you can get in this category.
Another category is the Turn-Key category. This is the category in which you as a builder or contractor go for a loan so that you can put up a house and later sell. If you are a builder who is very keen on investing and making good profits in the real estate industry then this is exactly where you fall. Progress draw mortgage and completion mortgage are the two types of mortgages that you will find in this category.
If you are not sure of the difference between a Completion mortgage and a Progress draw mortgage you can have a look below so that you can get to know. It’s good to know the difference before you can think of becoming an investor in such a venture.
A Completion mortgage is a type of mortgage where you are expected to go for it at the end when the home is fully built. After you have found a house you want to purchase, you can now go for the completion mortgage. One thing you have to remember is that in this mortgage, you must make a down payment before you think of anything else. This down payment can be paid in several installments. You can use the funds from the mortgage to clear the balance of what you owe the builder or developer once the home is built. If you are wondering what the payment schedule will look like, here is what the schedule will look like. For example, if the total cost of the house is $420,000, this is how the schedule might look like:
$15,000 to be paid when submitting the purchase offer
$15,000 after 30 days
$15,000 after 60 days
$15,000 after 90 days
And then lastly the balance of $360,000 is cleared when the home is fully built.
Progress draw mortgage
Progress draw mortgage is a bit different from the completion mortgage. In this type of mortgage, you will get the funds in bits. Usually, you will get the funds when certain levels of construction are achieved. These levels can be milestones that are measured in terms of percentage. There will be an agreement that will state the levels when you will receive the funds. This means that the funds will keep streaming in while construction continues. For example, you may get funds when 25% is completed, 50% is completed, 75% is completed, and later when it attains 100% completion. You have to note that at every stage, an inspector will be sent by your lender to inspect and ascertain that the builders have attained the said levels. Going by the above example it means that the inspector will be sent when the home is 25%, 50%, 75%, and 100% complete. The funds will be released upon confirmation by the inspector that the home has been built to the required level. When the inspector is not satisfied, it means you will have to wait a bit longer for the funds to come as you strive to rectify the areas with challenges. If this type of mortgage suits you best then it is what you should start thinking of right after you decide to try investing in new construction homes.
Now that you know you can get a mortgage for a new construction home, let that be your starting point as far as the journey to owning your own home is concerned. This must have now cleared all the worries you had concerning the mortgage. The path to becoming a great investor in the new construction home market is now clear. You now have to set the ball rolling and you will eventually own that home you have desired for a while. Get out of your comfort zone and own a home. Let nothing stand in your way.