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What Is A Home Construction Loan ?
If you have just inherited or bought a piece of land and want to build a home on it, a home construction loan is the type of loan you are looking for. |
There are two basic types of construction loans, one for large commercial projects, and the other meant for individuals who want to use the money to finance construction of a house. There are a few key points which separate a home construction loan from other types of loans.As opposed to other loans, while opting for a home construction loan, you are required to supply the lending institution a complete and thorough picture of construction costs and take into consideration material costs, inflation costs is any, time needed and any other costs which might crop up once construction is underway. Only once all this has been examined carefully is a home construction granted. This money can be used either to build a home from scratch, or just to make major changes or additions to your house, redo the interiors, build a pool etc.
Lending institutes are very careful in ensuring that the home construction loan is repaid on time, and although repayment usually occurs only once the house is built, they keep a keen eye on the construction project as well to make sure that the funds are being used as stated and construction is on time. If you own the land you are building on, this land is used as equity for the loan, and failure to make loan repayments leads to seizure of the land and house.
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