Many people work with mortgage companies in Birmingham, Michigan in order to get a loan to renovate their home. At Gem Home Loans, we can help you get the money you need to redo your kitchen, your bathroom, or your entire house. We can also help if you’ve recently made a land purchase and you want to build a new house from scratch. Here’s some information on how construction loans work, and how you can put yourself in the best position to qualify for one.

How Construction Loans Typically Work

Mortgage Companies Birmingham, MichiganWhether you’re buying a fixer-upper, you’re building a totally new house, or you want to do some major work on your current home, you’ll want to look into getting a construction loan. There are complexities involved with just about any sort of loan, of course, but construction loans are even more complex than most.

Why is this the case? In most instances, people who try to get construction loans don’t have as much collateral as they will with others. It usually takes more effort to get a construction loan, and as a result, it will take more time. Just because it might be tougher, however, that doesn’t mean it won’t be worth the effort.

These are just a few of the different construction loans you may want to pursue.

  • A construction-only loan – This is a loan that you’ll usually have to either pay off or refinance once your new home is finished. There’s a chance you may have to pay closing costs more than once, and you might also have to qualify during different phases of the construction process.
  • A home renovation loan – Do you need extra space in your kitchen? Are you tired of the way your master bathroom looks? Then it might be time to consider this type of loan. Or, you might be purchasing an entirely new home that you want to completely renovate. You will probably receive funds at different stages of the renovation.
  • A construction-to-permanent loan – Once construction is finished, such as on a new home, this kind of loan will typically be moved into your regular mortgage loan.

The amount of interest you’ll be paying on a construction loan will typically go up and down, depending on prime lending rate fluctuations. Compared to a conventional mortgage, the rate you pay will usually be quite a bit more. A lot of lenders don’t even make it clear that they offer any types of construction loans, so finding one can sometimes be pretty hard.

How to Qualify for Construction Loans

Most people find it harder to get approval for a construction loan when compared to a traditional mortgage loan. If you’re building a new house, you’ll probably have to show some sort of proof that the house will be built. In addition, your lender will probably require more documentation so you can show you’re stable enough financially to be able to pay back a construction loan. Down payments can run as much as 35 percent, and you’ll more than likely also need a high credit score.

How We Can Help

All of this sounds pretty daunting, doesn’t it? But one of the reasons Gem Home Loans is different form other mortgage companies in Birmingham, Michigan is that we work really hard to help people who need construction loans. We’ll do everything we can to make it as easy as possible. Contact us online or call (248) 780-1030 to learn more.