Are you planning to refinance or build a new home? Are you looking for appropriate construction loans? If yes, you have to do some research and compare construction loan rates before selecting your lender.
You need to know some things, especially if looking for a construction loan for commercial real estate.
1. The prequalification process
The prequalification process lets you know how much of a loan amount you qualify. It’s calculated based on your credits, capacity, and collateral, and gives you a good idea of the budget you should look out for.
This information helps lay the foundation for your next step, viz looking for the best VA construction loans.
2. How construction loans work
Construction loans comprise of two steps. The first is the construction loan that funds the time spent for construction. Then there is the ‘permanent’ loan, that’s usually a 30-year amortized loan. It includes both principal and interest payments.
The construction loan funds the construction process, which usually comprises of six-seven periods of the construction process. The loan usually lasts 12-18 months, depending on the project complexity and speed. The loan then converts into a 30-year amortized mortgage loan.
3. Eligibility requirements
VA construction loans are available to those who have their FormDD214, and who:
- have served more than 180 days in peacetime
- have served 90 consecutive days in wartime
- are active National Guard members for at least six years.
It’s also available to surviving spouses of servicemen killed or went missing in action. So you see, it’s easier to qualify for these loans when compared to conventional loans.
Besides, its income requirements are also comparatively more lenient. And most importantly, you don’t have to be a first-time buyer to qualify for the loan.
4. No down payment
Unlike other loans, VA loans don’t require a down payment. You can use any money saved for a down payment for other expenses. The interest rates are even lower for these loans when compared to traditional loans.
It’s all thanks to the VA home loan program backed by the U.S. Department of Veteran Affairs(VA). This federal guarantee is why loan lenders are willing to quote more favorable terms for their VA loans than conventional home loans.
5. No worry about PMI payments
You will be happy to know that VA loans don’t have any private mortgage insurance or PMI. This loan requirement applies in cases where the buyer doesn’t have the cash to pay for a 20% down payment.
With the absence of PMIs, you are protected from any fines or forfeiture if you cannot make a loan payment. So, in short, VA loans don’t need any down payment or even 20% down.
Avoiding PMIs is an excellent feature for you because it saves you anywhere between 0.5 to 3%of your actual loan amount annually.
You now know these 5 important things about VA construction loans. You also realize why so many people opt for it than conventional loans to construct or renovate their homes.
Besides, it’s available across the US, providing easy accessibility from wherever you are in the US. Please visit here for more details: https://blakemortgage.com/construction-loans