Mortgage Companies Berkley, Michigan

Most people associate mortgage companies in Berkley, Michigan with traditional home loans, and with good reason. But you can also turn to mortgage companies like Gem Home Loans if you’re interested in pursuing a construction loan. You might not want to purchase an existing home. Rather, you want to build one from the ground up. If that’s the case, our experts have a lot of experience in this area, and we’ll be able to help. We’ll let you know of this kind of loan will make sense.

How Construction Loans Work

Like the name implies, a construction loan is typically designed for people who already have a piece of land and want to put a house on that property. There are also instances where people can get construction loans to purchase an existing “fixer upper” house. Even though there are complexities involved with any sort of home loan, construction loans are more complex. One complicating factor is that people tend not to have a lot of collateral. Also, construction loans involve more work, so processing takes longer.

Don’t take that to mean you shouldn’t pursue a construction loan. It might actually wind up being one of the best decisions you’ve ever made. These are some of the different options.

• A construction-only loan – This is a loan that needs to either be paid or refinanced upon completion of the home. There are some instances where borrowers will have to pay multiple closing costs, and may also have to qualify multiple times as well.

• A renovation loan – If you’re looking to purchase a home, fix it up, and either move in or resell it, then a renovation loan might be the way to go. Renovation loans are typically rolled into the regular mortgage loan after the remodeling is done. You will receive funds according to a so-called “draw schedule.” This just means that after one phase of the renovation is finished, funds will be released for the second phase, and so on and so on until the project is complete.

• A construction-to-permanent loan – This kind of loan simply converts to a traditional mortgage after the house is built.

The prime lending rate will have a major impact on how much interest you’ll pay on a construction loan. Also, rates tend to be higher than a traditional loan. Many lenders won’t even advertise that they offer construction loans, so shopping around can be difficult.

Construction loans will usually cover costs while construction is in process. Borrowers will have to pay interest each month.

Can You Qualify for a Construction Loan?

As you might already expect, qualifying for a construction loan can be harder than qualifying for a regular mortgage. You’ll probably hear lenders wanting some sort of proof that the home will actually be constructed. In addition, there’s a good chance that you’ll need to provide more documentation than you normally would in order to show you’re stable enough financially to qualify. Construction loans typically require a down payment of at least 35 percent, a debt-to-income ratio of no more than 45 percent, and a high credit score.

At Gem Home Loans, we’re not like a lot of other mortgage companies in Berkley, Michigan. We’ll be honest at all times, and let you know exactly what kind of loans you’ll be able to qualify for. Construction loans might be hard to get, but if that’s what you want, we’ll be more than happy to help. Learn more by contacting us online or calling (248) 780-1030.