Mortgage Question

[beatboy77]

I have a question regarding a loan we hope to get this fall. What we want to do is get a loan for a house to be constructed after we are approved. If we get approved for this type of loan is it possible for us not to make payments on it until the house is finished and we move in, which could take as much as 5 to 6 months? Secondly, what is this type of loan called?

Thanks,

Josh

[Allie Mae]

You need a construction loan. If you can tell me a bit more about your situation (income, credit, employment history, property type, state, etc.) I can point you in the direction of the best lenders.

[firstsource]

Another route you can take is to have the builder get a construction loan on the property, and when it is completed, you have a loan to pay off the builder. There are several advantages to this way of doing this.

1) builders normally have a better interest rate than you do, so the cost that you would incure as the draws are made, would be born by the builder.

2) if it is the builder's money, they are more likely to finish on time. If it is your money, and he is building 2 homes at the same time, and one is owner financed and one builder financed, the builder may have an incentive to work on the one that his money is at risk on, more than the one that "his" interest clock is ticking.

Charles

[meebones]

I am having a house built right now and we took out a land/construction loan and the interest is included in the loan. So we are not required to pay anything. A month before construction is complete we will apply for a 30 year fix - lock in an interest rate for that and then once we are done building we move and start paying the mortgage. Where we are building the interest rate on a land/construction loan is 7% - it is high but it is only while the building is going on.