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.
What is a Construction Loan?
A construction loan is a short-term financing solution to help cover the costs of building a new home or remodeling or renovation projects.
How do Construction Loans Work?
Construction loans are typically dependent on the construction timeline. So, you must first decide if you are purchasing an empty plot of land to build a home or doing a gut renovation on an existing property.
After drawing up the building and budget plans, you must submit them to the mortgage company for approval. Once the plans are approved, you will submit a mortgage application, and your loan will move on to underwriting. Similar to a regular purchase or refinance transaction, the underwriter will review your credit and income documentation to ensure your ability to repay the loan.
Types of Construction Loans
GuardHill offers construction to permanent loans and remodeling and renovation loans.
Construction to Permanent Loan
This type of loan is for new builds, as the mortgage covers the cost associated with building the home and converts to a permanent mortgage once the project is completed. One of the main benefits of this program is that it is considered one loan, so you are only required to complete the application and closing process once. This program is excellent for those looking to build a custom home from the ground up.
Construction Loans for Remodels and Renovations
These programs allow you to complete home repairs or renovations to change up the style of a new home purchase or repair damages to improve the home’s longevity. Construction loans for remodels and renovations have become increasingly popular as homeowners are spending more time at home and desire to upgrade their space and potentially increase the home’s resale value.
FHA 203K Construction Loan
An FHA 203K construction loan is a federally backed FHA loan 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 cover the renovations.
Fannie Mae HomeStyle Renovation Construction Loan
The Fannie Mae HomeStyle Renovation loan is another type of home improvement program that allows you to combine the home purchase and renovation costs into one loan. The only difference is that this loan is not federally backed.
Some common renovations that are eligible under these programs are:
- A kitchen remodel
- Creating an open floor plan
- Foundation repairs
- Room additions
- Bathroom remodels
- Plumbing or septic updates
- Driveway or sidewalk repairs
Which Home Improvements May Add the Most Value to Your Home?
Updating your home may seem costly, but these efforts can be very beneficial in the long run. Today, many homebuyers may be looking for move-in-ready homes and may be willing to pay a premium for updated homes. The following may give you the highest return on your investment:
- Replacing the Garage Door
This can help boost curb appeal.
- Minor Kitchen Remodel
Homeowners consider the kitchen the heart of the home. Today, home buyers are looking for a functional kitchen with top-of-the-line appliances.
- Replacing the Home’s Siding
If you have siding, you may want to consider replacing any old, cracking, or worn siding to boost curb appeal.
What are the Construction Loan Requirements?
Construction loans may require more stringent income and credit guidelines than a traditional purchase or refinance as they are deemed riskier to the mortgage company. Some general requirements for all construction loans include:
- Having a higher credit score
- Showing stable income and employment history
- Having a lower debt-to-income (DTI) ratio (lenders may require a DTI ratio less than 45%)
- A down payment of at least 20% to 30%
- Building plans for a new construction project
- Plans or blueprints for any remodeling projects
- Basic understanding and explanation of the construction timeline
Why Choose GuardHill?
GuardHill has over 31 years of mortgage financing experience and specializes in providing standard and out-of-the-box financing solutions for our customers. GuardHill works with numerous investors and lenders and offers various loan programs to provide borrowers with the best financing solutions possible.
Contact us to get started on your construction loan today!