Applying for a loan to construct a home is a bit more complex than applying for a mortgage to buy an existing home. But if you go into the process well-prepared, you can move through the steps toward approval quickly and smoothly. Following are a few tips for success.

1. Apply with a competitive borrower profile. When applying for a construction loan, you will need to demonstrate that you are not too risky to finance. As when you apply for other types of loans, lenders will be interested in your credit score, debt-to-income (DTI) ratio, income and assets. Moreover, the qualification requirements may be more rigorous than they would be for a loan to purchase an existing property. So, make sure that you have done what you can to raise your credit score and income, while improving your DTI ratio. If you need advice for how you can improve these metrics, we can do that during your construction loan consultation.
2. Offer a breakdown of your project budget. A lender is not going to consider approving you if they do not know that your project is financially viable. So, you need to provide a breakdown of how the money will be used. This should include costs for materials, site preparation, design work, project management, insurance and bonding, permits and fees, construction labor, and more.
3. Bring as much documentation as you can for your project. When you are ready to apply for your construction loan, you need to not only bring a breakdown of your project budget, but as much other supporting documentation as you can. That means that you should not apply for financing early on in the planning stages. You should wait until you have had a chance to choose a team for your project, developed your blueprints and finalized them, and successfully applied for a building permit. The permit in particular helps to prove that your project is viable, as it already passed muster with the department that issued the permit. During your consultation, we will let you know all the documents that you should submit with your application.

With all of this documentation included with your loan application, we will be able to see that your construction project is not speculative. It will be clear that it has a budget and schedule, and is structurally sound.

Apply for a Construction Loan

Applying for a construction loan can be a simple, straightforward process with the right mortgage company on your side. MMS Mortgage Services has extensive experience with construction loans, and can walk you through each step. To make financing convenient, we even offer construction-to-permanent loans that roll together construction financing and a permanent home loan.

If you have questions about construction loans, or you are ready to apply for a loan to finance building your own home, please call (248) 788-0800 to schedule your consultation. We can help you build a home in Farmington Hills, throughout Michigan, and in 14 other states.

Thinking about building your own home, but still trying to understand the pros and cons of doing so? Below, we explain the advantages of building a home from the ground up rather than buying an existing home, as well as the drawbacks you should be aware of. Thankfully, you can minimize most of those potential drawbacks through your choice of builder, construction method, mortgage company and loan.

Pros of Building Your Own Home

Here are some of the advantages of building your own home.

• You get to fully customize your home’s layout and appearance to fit your lifestyle and personal aesthetics. It will very much be your home built entirely around your needs and those of your family.

• Your home can be a perfect fit for the surrounding landscape, and even make use of those surroundings as part of an energy-efficient design.

• When building your own home, you have much more freedom over the location of the home. So long as the land you want is available and you are working within zoning regulations, you can purchase it and start construction.

• The condition of the home depends entirely on the quality of the construction. So long as that quality is there, you should not need to worry about repairing anything for some time.

• Decisions you make about your home’s materials and design can reduce the amount of long-term maintenance you need to deal with. For example, if you construct a steel house, it should require a lot less maintenance than a traditional wood home.

Cons of Building Your Own Home

Now that you know some of the advantages of building your own home, let’s go over some of the potential downsides. As you will see, most of these potential negatives do not need to hold you back.

• It may cost you more to build your own home than it would to buy an existing one. That said, with prefabricated homes taking off, there are a lot of options out there that cost less than you might think.

• There is a longer timeline involved in home construction than there is in purchasing a home that already exists. Coordinating with designers, builders, lenders and the government also makes for a lot of logistical legwork from start to finish. Again, you may want to look into prefab structures if you want to speed things along.

• Home construction loans can be complex—though with the right mortgage company, the process can move smoothly forward.

Build Your Dream Home Now

When you contact MMS Mortgage Services about a new construction loan, we will explain exactly what you need to do to maximize your chances of a swift approval for your mortgage application. We will work with you to help you choose a loan term and structure that will fit your financial needs now and over the years to come. We can even help you apply for a single close loan for construction and permanent financing.

If you are ready to get started with your home construction project, please contact us at (248) 788-0800 to set up your mortgage consultation. We can help you finance the construction of a home in Michigan or 15 others states.

Achieving the goal of moving into your dream house may require a mortgage but financing the construction may require something different than a standard mortgage used to complete the purchase of an existing house. A construction mortgage loan pays for the building or renovation of a house. However, such a mortgage loan will require a different approval process than a traditional mortgage loan used to purchase a move-in ready house. If you’re hoping to build a new (custom) house or conduct major renovations into an existing house, construction loans might be the option for you.

What is a Construction Mortgage Loan?

Construction mortgage loans are made to finance the construction and renovation of a home. This type of mortgage loan usually carries lower interest rates than mortgages and is usually for shorter terms, with the entire loan paid off upon completion of the project. Lenders usually require a construction loan to define how the money will be used.A construction loan is the type of mortgage loan wherein you’re essentially getting cash to pay for the construction as progress is completed on the various phases of the construction process.

Types of Construction Loan

There are a few different types of construction loans, and the one that is right for you will depend on your financial situation and your goals.

Construction-to-Permanent Loans

This type of loan is the most common and is the one used in most home renovation projects. T After the work is done, the loan is then repaid over a term of a few years.

What is a “TRUE” Construction Mortgage Loan

A “TRUE” Construction Mortgage loan is used to pay all costs of construction during the construction process to make the house a move-in ready property. This can include everything from the purchase of the vacant land and or demolishing an existing structure to landscaping and light fixtures. This type of loan usually requires a contract with a licensed builder, a complete line-item costs to complete data (value) and a plans & specs appraisal of the finished product as proposed. The lender will establish the loan amount in relation to the lower of appraised and cost to complete value (LTV) based on credit and other underwriting criteria. This type of construction mortgage loan generally requires interest only payments based on the amount of money you have drawn to pay for the previous month(s) progress payments made to the various providers of goods and services while building the house. Once the house is completed as agreed and you have a certificate of occupancy, you now are required to pay back the money you borrowed to complete the construction of your dream house. This can be accomplished in one of two ways. You will be required to commit to one or the other prior signing for the construction mortgage loan way at the beginning of the process.

The first way is a Construction to Permanent Mortgage Loan. When the construction is completed your construction loan balance is simply rolled over into a standard 30 year fixed loan, just as if you purchased a completed (existing) house.The second way is to get an “END” loan. This is a mortgage loan that is used to pay off the construction mortgage loan balance. This is really nothing more than a refinance mortgage loan. Which has many advantages and disadvantages. Contact one of our construction mortgage loan officers to discuss the option that best meets your goals.

Final Thoughts

If you’re looking to significantly renovate your home, a construction loan might be just the ticket. You can use it to finance the construction of new additions, or you can use it to construct a custom home from scratch.

MMS Mortgage Services, Ltd. is here to help you finance the house of your dreams. As a Licensed Mortgage Lender in Michigan and beyond, we can walk you through the mortgage process from start to finish. Whenever you need refinancing or construction loans in Michigan, MMS Mortgage Services, Ltd. is the one to call. Please call (248) 788-0800 or toll free at (800) 945-4506 then press 2, to schedule your free consultation.