Construction
home loan

Construction
home loan

Building a house gives buyers the freedom to build it the way they want. When buyers are on the market for a house, what they see is what they get. Sure, you can strip a house of its furniture, take a step back and imagine what it will look like when you have lived in it for a few years and made it yours. But it might not be what you envisioned. To build a house the way you want to, buyers need a construction loan.

Building a house gives buyers the freedom to build it the way they want. When buyers are on the market for a house, what they see is what they get. Sure, you can strip a house of its furniture, take a step back and imagine what it will look like when you have lived in it for a few years and made it yours. But it might not be what you envisioned. To build a house the way you want to, buyers need a construction loan.

What is a Construction home loan?

A construction loan is a short-term loan used to finance the cost of building a house or real estate project. The length is reflective of the time needed to build the house, which is usually between six months to a year.

To be qualified for a construction loan, most lenders require a 20-25% down payment. Interest rates are higher because of a term called “prime-plus”. This is because funds are not secured by a completed home and are released as prearranged milestones.

There are a variety of loan options if you choose this type of loan. Not only for building a house, but renovation, deconstructing, etc.

The various options offered by Starboard Financial are detailed below:

What is a Construction Loan?

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The Types of Constructions Loans

Construction-only Loan

Construction-Only

Construction-only loans, as the name implies, funds only the build of the house. It does not roll into the mortgage. Qualifying standards are more difficult, and interest rates are likely to be higher than traditional loans due to the prime-plus interest rate, since there is a higher level of risk. Read More

Construction-To-Permanent

Construction-to-Permanent loans cover not only the construction period but are then converted to the traditional mortgage. Homebuyers make interest only payments. Since this type of loan rolls into a conventional mortgage, buyers will only pay one set of closing costs. Read More
Construction-to-Permanent

Requirements for Construction Loans

  • A notarized copy of the deed for the land you’re building on. If you’re buying the land, bring a copy of the purchase agreement.
  • Plans & specifications
  • Construction contract
  • Federal Tax Returns (1040s) for the last 2 years
  • Bank Statements from the last 2 months
  • Most recent pay stubs
  • W-2s from the past 2 years
  • Call Starboard Financial for prequalification

Starboard Financial offers
Conventional or FHA construction loans

Requirements for Conventional Construction Loans:

  • Credit score of 680
  • Income requirements, such as debt-to-income ratio of 45%
  • Down payment of 20-25%
  • Detailed plan of construction project
  • Builder for the project

Requirements for FHA
Construction Loans:

  • Credit score of 640 or higher
      (500 with 10% down payment)
  • Debt-to-income ratio below 43%
  • Down payment of at least 3.5% (10% if below 579)
  • Cannot exceed FHA loan limits

There are three different types of homes that can be built

Stick-Built Construction Loan

Stick-Built:

Stick-built homes are built on site. They are built entirely from scratch using traditional construction methods. They are called stick-built because lumber is used to create the walls and roof. Out of the three houses that can be constructed, stick-built tend to appreciate most in value. Read More

Manufactured Homes:

These types of homes come pre-built to ensure efficiency, affordability, and portability, and are moved to the property based on owner discretion. To ensure portability, they come with a wheeled chassis. They cost less than modular homes and are limited to 2,200 sq ft. Be aware that manufactured homes lose value over time. Read More
Manufactured Construction Loan
Manufactured Construction Loan

Manufactured Homes:

These types of homes come pre-built to ensure efficiency, affordability, and portability, and are moved to the property based on owner discretion. To ensure portability, they come with a wheeled chassis. They cost less than modular homes and are limited to 2,200 sq ft. Be aware that manufactured homes lose value over time. Read More
Modular Construction Loan

Modular:

Unlike a manufactured home, modular homes are not pre-built. The individual rooms are assembled and shipped to the property where they are then built on-site. Because of this, every room is customizable. They cost more, but they appreciate in value. Read More

What are the overall benefits of construction loans:

• Flexible construction terms available
• Simple builder approval process
• Interest-only payment during the construction phase
• Wide variety of long-term loan programs to choose from



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Starboard Financial | NMLS #156931

Office:  (480) 897-9777
Fax:  (888) 344-2645
Email: construction@starboardfinancial.com

Starboard Financial Management, LLC
4145 E. Baseline Rd, Gilbert, AZ  85234