Learn More About Construction Loans With the Score Team

Intended to cover the full cost of constructing a new home or preforming a rehabbing for a home, Construction Loans are higher interest rate, shorter term loans paid to a contractor directly instead of the borrower, and as construction targets are completed. Construction loans typically are for a one year period of time. When construction on the home is completed,  the borrower has the option to either refinance the construction loan into a permanent mortgage or attempt to get a new loan to pay off the construction loan (sometimes referred to as the “end loan”). Call the Score Team at (314) 607-5566 to learn more about construction loans and how they can help you!

Who is eligible?

Unlike a traditional mortgage, when you borrow money for a Construction Loan, there is probably not any collateral available since the house has not been built yet. Because of this, there are a few extra considerations in a construction loan. First, a 20-30% down payment is usually required for new construction. Also, your debt-to-income ratio (DTI) cannot be more than 45% of your income and you should have a credit score higher than 680. The lender may want to know what your plan is after the construction is completed whether you will pay the balance in cash or refinance upon completion.

Features and Benefits of a Construction Loan

  • They’re flexible

    When it comes to loan terms and guidelines, Construction Loans are much more flexible than traditional loans, and are often designed around the specific needs or plans for your project.

  • Lower interest

    With a Construction Loan, you don’t pay on the principal (as the loan won’t be paid out in full until the project is complete.) Rather, during that time, you pay a lower, interest-only rate.

  • The home of your dreams

    While a Construction Loan has a few more hoops to jump through, the ultimate outcome is that you are able to fund the home of your dreams, exactly as you and your contractor plan it.