Financing your dream home
Navigating the housing market and financing a new or existing home is a complicated process. Many home buyers are familiar with the typical mortgage loans that banks offer to purchase an already existing home. For those looking to buy land and build an entirely new home, the process is more complex. But the process shouldn’t intimidate you from pursuing the house of your dreams.
We’re here to explain the options available that can help you finance your home goals – lot and construction loans.
What are lot loans?
Lot loans, which are sometimes referred to as land loans, are used to finance the purchase of a plot of land. These loans are typically used by future home builders who aren’t immediately ready to begin constructing their new home, for reasons such as needing more time to prepare home plans.
Depending on the type of land you’re looking to purchase, there are different types of lot loans available. These include the raw land loans (for undeveloped land, typically the highest risk loan option), unimproved land loans (for land that is slightly more developed, still somewhat risky), and improved land loans (for developed land, typically the least risky loan but the most expensive land to purchase).
What are construction loans?
Construction loans, which finance the costs of building a new home, are designed for people who have purchased land and are ready to start building on it right away. Once you’ve purchased land and you’re ready to build your new home, applying for a construction loan for financing is likely the next step.
When going through the process of financing land and construction of your new home, it is important to understand what options you have. That’s why it’s critical to have banking professionals in your corner.