Construction Loans

[pdog661]

Hi,

My wife and I have been house shopping, and its been an up and down event as all house shopping is and always will be. 

We found a nice home, but it requires a ton of work.  We originally planned on only putting 5% down on a conventional loan.  Now we are thinking of looking into construction loans instead. 

I am completely new to construction loans...... What percentage down would be required?  Are the approval processes the same?

Thanks any advice is truly appreciated.

[tooleman694]

We looked into it, there are a couple of ways to do it.

You buy the land, and get someone to build the home with the land as collateral.

When the home is ready, you use the equity in the land as your down payment.

You can also do a construction loan, and convert to a mortgage loan when it is done but I dont know how that works.

[JM-AM]

Im a little confused..

Are you thinking of a construction loan or a rehab loan to buy a fixer upper?

A construction loan is done the way tooleman described.

A rehab loan is a whole different process...

[pdog661]

Thanks sorry for the confusion.

We are going to rehab the current structure on the property. 

I think we would need 125K of funds make the house "live able."  The house is an old English manor, and most of the rooms do not even have electrical run into them.

Overall the structure is perfect, but we would need to run all HVAC, all electrical, and replace all old iron water pipes.

Thanks for the help. 

[JM-AM]

The process is not very quick...

Rehab loans you need to submit bids for repairs and things of that nature.

You cant just make an educated guess of how much it cost.

Best advice is to go and sit with a LO or Broker who deals with rehab loans and let them go over all the details and the process.

Once you have a full understanding of the process then make a decision if you want to proceed.

Many people have purchased Rehab Homes, and saved themselves a fortune overall, and the Homes look beautiful. for

Just some do not have the patience...