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New Construction

Construction loans are one of the most diverse types of loans out there in the mortgage industry. So many factors of the construction project are used to determine the terms and conditions the lenders will provide if and when they decide to proceed with the loan.

For instance, the size of the job and the amount of the loan, will it take two months or two years? Are you doing the job yourself, or are you hiring a contractor? Are you purchasing the land the construction will be built on? Where is the location of the property? Etc.

All of the above scenarios play a role in the decisioning process.

For construction loans on large projects, the interest is paid only when the money is used. For example, the contractor will purchase the material to build the foundation of the project, you would only pay interest on the amount of money the contractor used to build the foundation, not the entire amount of the construction loan.

Once the job is done, the total amount of the job is amortized into one monthly payment including principal and interest.

If you have a relatively small project, such as an addition to your existing home for less than $100,000.00, you might want to consider a home equity loan. It is a lot less of a hassle and paperwork. It will also go through a whole lot quicker.

If you are considering going with new construction, I beg you to take your time and be very careful. Do your homework and educate yourself as much as you can about the process. And, as always, shop around for the best deal.

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