If you want to build your own Norwich, CT home and you have started the research, you have probably come to learn that building a home comes with many challenges, particularly where financing is concerned. When you build your own home in Norwich, CT, you can choose everything from the space and style to the features and upgrades in your home, but it all begins with choosing the right type of financing.
Construction loans are specialty loan products that can be used by Norwich, CT home builders and home buyers. This type of loan differs from a regular mortgage in that it is short-term and it requires repayment after the home construction is complete. Funds are usually released to the home builder, who uses the funds as necessary throughout construction. In most cases, you will make interest only payments during construction, and the loan becomes due when you receive your certificate of completion. The majority of construction loans today have a variable interest rate.
When your loan application is approved by Summit Funding, the lender and contractor work together to make a draw schedule based on the stages of your home construction. Interest will only be charged on money disbursed to date, not for the full amount. You will be required to provide several types of documentation throughout the construction phase, including inspection reports, builder validation and verification.
Before you apply for a Norwich, CT construction loan, work on determining the cost of your project. Keep in mind that construction loans are far easier to qualify for if you already own the land, as it can be considered equity on the loan. If you do not own the land, expect to pay a down payment between 20% to 30%.
Summit Funding offers several types of construction loans in Norwich, CT, each with varying features to best match your situation. The most popular feature among borrowers is the ability to roll the construction loan into a standard mortgage. This option means you pay closing costs just once.
This type of loan is known as construction-to-permanent financing, and it will turn your construction loan into a regular home loan as soon as the certificate of occupancy is issued. In most cases, you will get a 30-year mortgage, with the option to look for a different mortgage later if you want.