If you’re thinking of building — rather than buying — your dream house, good for you! However, consider that instead of financing construction with a traditional mortgage, you’ll likely need a construction loan. This article helps explain what a construction loan is, construction loan timelines, how these types of loans work and how to approach financing for contractors.
What are construction loans?
While a traditional home loan is based on the fair market value of the home and determined by comparing its condition to other homes recently sold in the area, construction loans are based on the projected value of the new home upon completion.