Description

The construction loan is used to finance the cost of building the home, and it is typically interest-only during the construction period. Once the home is completed, the construction loan is converted into a permanent loan, which is a traditional mortgage with a fixed interest rate and monthly payments.

To qualify for a conventional construction loan, you will need to meet certain requirements, including:

• A good credit score (typically 680 or higher)
• A minimum down payment of 20%
• A stable income
• A clear construction budget

The interest rate on a conventional construction loan will vary depending on your credit score, the amount of the loan, and the length of the construction period.

Here are some of the benefits of a conventional construction loan:

• You can borrow the full amount of the construction costs, including the cost of land.
• You can get a fixed interest rate on the permanent loan, which can help you budget for your monthly payments.
• You can close on the construction loan quickly, which can help you get started on your project.

Here are some of the drawbacks of a conventional construction loan:

• You will need to make a down payment of 20%, which can be a significant amount of money.
• The interest rate on the construction loan may be higher than the interest rate on a traditional mortgage.
• You will need to pay closing costs on both the construction loan and the permanent loan.

If you are considering building a new home, a conventional construction loan can be a good option. However, it is important to carefully compare the terms and conditions of different loans before you choose one.