Construction loans are granted to people who want to build their homes from scratch. It is very different from traditional mortgages, which are intended to lend the money to purchase the house already built.
However, construction loans are more complicated to acquire; they usually have higher interest rates than expected. It is essential to know all the options available in the market; the mission is to get the lowest interest rate.
Best construction loan lenders
You’ll know you’re looking at a good construction loan because it will have low rates and flexible amounts. In addition, the down payments are common and do not require large credit requirements. Some of the best options include:
Nationwide Home Loans Group
Generally, the best lender when you want to build your own home has low-interest rates and down payment requirements. Nationwide Home Loans Group is an independent community bank and is available in 50 different states across the country.
The minimum you can get on your construction loan is $125,000. Interest rates vary depending on the market but are almost always between 1% and 1.25%.
Mortgage payments will not be charged until the house is completely built. To acquire a loan with this entity, you must have three credit scores no lower than 640.
However, it is not an option available for the states of Hawaii, Alaska, or New York, and you cannot apply for less than the minimum amount mentioned above.
This lender is the best if you don’t have a good credit score; it offers fast financing with no minimum credit score requirements. It is a private lender that focuses on citizens going through complex situations with their credit reports.
Their loans are asset-based rather than credit-based, which allows them to be more creative with their programs because all loans will be backed by collateral. They are one of the most flexible lenders in the market.
Of course, the interest rates are noticeably higher compared to others, but some of their options do not have a penalty if you decide to pay early. In addition, it allows you to include all purchase and construction prices in the same loan.
To get the loan, you must make a down payment of 20% to 30%, and their loan terms are shorter than normal. You can have between one and seven years to pay back the money.
Online options are not long in coming, and this will be the best lender for it. The application process is simple and offers you quick financing and pre-qualification in just a few steps. It is headquartered in New York but is licensed to work in up to 15 states.
Their loans range from $100,000 to $5 million, depending on the loan chosen. You can decide on the special loan if you are the actual builder; they also have options if you will hire someone else for the job or if you need to finance a newly built home.
You also have options for home renovations; that is, the home is already built but requires some upgrades to be able to inhabit it. However, to access this loan, you must have a minimum credit score of 620.
Nationwide Home Loans, Inc
When you are a first-time buyer, you need a quality company that can offer you real services and keeps you away from potential scams. With this lender, down payments are very low and unnecessary for some loans.
The loan is only available in eight states in the country, plus it has an online presence for borrowers who want information from construction specialists. You will not be the one to choose the loan; instead, you must provide information to the lender, and they will tell you which service you qualify for.
Go Mortgage Corporation
If you are looking for low-down payments, this is the best lender. It is available in 35 states and has government-backed loan programs. You may qualify for the FHA program; if so, the down payment could be as low as 3.5%.
No down payment is necessary if you qualify for programs like Va or USDA. To get the benefits of this lender, you need a credit score between 640 and 680. Furthermore, the minimum loan amount is 125,000.
What is the purpose of a construction loan?
The construction loan is intended to help you build your home. Generally, they are fast loans; here, you usually find different types of lenders.
You can find home purchase loans, loans that will be only for the construction period, builder loans, and combination loans. Each company will offer you different options.