Abby's Guide to Home Mortgage Loan
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Construction loans

Mortgage home loan construction loan are basically the same thing.  They are loans to buy an asset, its just that one is in place and the other is in the blueprint or construction phase.

Buying new construction is an acquired taste.  Depending on the market there are those who move from one new construction home to another.  The theory is that the original purchase price of the home will immediately increase significantly once the last home in the neighborhood is built.  This has worked for many but it has also backfired on some.

There are also people who are building their dream home on their dream lot and don't plan on flipping or selling anytime soon.

How do you get financing for new construction?  The short answer is the same place you get it for existing homes.  It is a little more challenging.

First, if you are paying a mortgage right now you will be paying another when you take on the construction loan.  Frequently a bank will allow you to pay only the interest portion of the loan while the construction is taking place.  This may sound like a great deal but you need to remember that the vast majority of your monthly payments(especially early in the loan) is interest - not principal.

Banks will also have products that will allow you to convert your short term(construction loan) to long term(regular mortgage) without another set of closing costs.  This can save thousands.

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