The Department of Housing and Urban Developments Federal Housing Administration insures loans that enable people in target areas to purchase and rehabilitate property as a part of their efforts to revitalize neighborhoods. As with the RHS insured loans, the FHA loans have low interest rates and low down payments.
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Generally repayment for construction loans does not begin until after the construction has ended. The time period allotted for construction is usually a year to eighteen months. No payment should be made before the homeowner is able to walk into his or her brand new home.
19Construction loans differ from other home loans in that they are based on the potential value of your home, instead of actual value. Therefore, the amount of the loan is calculated by an appraiser who estimates that amount that will be needed by assessing the plans for your home, the materials to be used, the cost of labor and also the value of other similar homes in the area. This report is combined with your credit report to figure the total loan amount and interest rates.
An option for those that do not qualify for standard construction loans are loans insured or funded by the Rural Housing Service(RHS). The RHS works under the Department of Agriculture, and aids families living in rural areas who do have adequate housing by providing loans that will enable them to purchase or construct homes in those areas. These loans require no down payments and incur very low interest.