Are you looking to build the home of your dreams? Or maybe you are looking to purchase a fixer-upper or undergo significant renovations to your current home. No matter which goal, GuardHill offers construction loans for new builds and renovations to help you have the home of your dreams.
How do Construction Loans Work?
Construction loans cover the costs associated with a new construction or renovation project.
The construction loan process
First, you must get the building plans approved by the mortgage company. Then, you will go through a regular application and approval process like a purchase or refinance loan. During the approval process, the underwriter will review your credit and income documentation to ensure your ability to repay the loan. Depending on what type of construction loan you apply for and receive, the process after the closing may vary.
Construction Loan Requirements
Construction loans may require more stringent income and credit guidelines compared to a traditional purchase or refinance. Some requirements include:
- High credit score
- Stable income and employment history
- Lower debt-to-income (DTI) ratio (lenders may require a DTI ratio less than 45%)
- Down payment of at least 20% to 30%
- Building plans for a new construction project
- Plans for any remodeling projects
- Basic understanding and explanation of the construction timeline
Different Types of Construction Loans
Construction to permanent loans for new builds
A construction loan converts to a permanent mortgage once the project is complete. This type of financing is considered one loan, so you only complete the application and closing process once. A construction to permanent loan is excellent for those looking to build a custom home from the ground up.
Construction loans for remodels and renovations
Construction loans for remodels and renovations allow you to complete home repairs or renovations to improve your home’s resale value. Some homebuyers may want to renovate to add their style or touch to the house. Others may want to repair damages to improve the longevity of the house. Either way, renovations have become increasingly popular as more and more homeowners are spending more time at home and need to upgrade their space. Some common renovations that are eligible for a construction loan include:
- A kitchen remodel
- Creating an open floor plan
- Corrects of deferred maintenance
- Foundation repairs
- Room additions
- Bathroom remodel
- Plumbing or septic updates
- Driveway or sidewalk repairs
There are two popular types of construction loans for renovations – FHA 203k and Fannie Mae HomeStyle renovation loans.
– FHA 203K construction loans
An FHA 203K construction loan is federally backed and is ideal for those purchasing a fixer-upper home. This program rolls all the renovation costs into one loan – you will receive funds to buy the home and money needed for renovations or repairs.
– Fannie Mae HomeStyle renovation construction loans
The Fannie Mae HomeStyle renovation loan is another type of home improvement renovation program that allows you to combine the home and renovation costs into one loan. The only difference is that this loan is not federally backed.
Why Choose GuardHill for your Construction Loans?
GuardHill is prepared to help make your vision become a reality, whether it be to build a home from the ground up or undergo renovations. Our team will ensure an easy and seamless mortgage process with our custom-tailored loan programs and over 28 years of mortgage financing experience.
Contact us to get started on your construction loan today!