A construction loan is a short-term loan used for financing the cost of construction. Nowadays, the costs of construction of a house can be very expensive and you cannot finance the whole value involved in the construction process on your own. At that time a construction loan helps you with the finances. According to your requirement of money for the construction of the house you can get a loan. Generally a construction loan is taken for the time period involved in the construction process, which makes it a short-term loan.
There are two types of construction loans. In the first type, your construction loan is refinanced into a permanent loan once the completion is over. In this your construction loan automatically converts into a mortgage loan when it is over. This is an easy process as you will have to fill the application form only once and the initial costs incurred are also comparatively less. The second type is known as construction-only loan. In this type you have to pay back the loan once the completion is over. You can decide between these two about which kind of loan you want.
A construction loan is paid between the various stages of construction like, framing of the house, completion of exteriors, or interior finishing. A construction loan is given with an estimation of the future value of the property. The cost of construction you incur in the construction process also plays a significant role in deciding the loan amount.
LoanShopUSA.com can find the right lender to get you a construction loan. This involves filling an application form to get the loan. It includes your personal and financial details and your credit status. This also includes details of the land on which you are planning to build a house. Once this process is over, a number of lenders will contact you with different quotes. Before taking any of these loans always compare the loan rates to get a fair deal. You should also read between the fine lines to know the terms and conditions of the loan. Another point to be taken into consideration is the interest rate of the loan, as the interest rate is generally variable.
