In the process of getting ready to buy a new home many people often try to decide on buying an existing home or building their dream home. Everyone knows how to buy an existing home. You settle on the real estate agent, you look at a few dozen homes that don't match the criteria you originally gave said real estate agent until you magically find that one you want, then you head to the bank and get a mortgage. That is the overly simplified version of that scenario but, for the most part, it is how it works. Building a home to your specifications is quite different.

How Construction Loans Work Construction loans, being story loans, require the lender to know the story behind the planned construction before they will lend the money. Because of this, these loans are not standardized like many loans are underwritten to Fannie Mae or Freddie Mac guidelines. With that being said, there are usually some very common features of these loans. They usually require interest-only payments during the construction process and become due upon completion. Completion usually means that the house has gained its certificate of occupancy.

Another consideration to keep in mind before a major home remodel is the length of time needed for the remodel and will you need to move out of the house for a while. If you are planning to completely renovate the kitchen and/or baths, you may need to stay somewhere else for a while. If you have small children this could become a problem.

Getting The Most For Your Money It is fairly common knowledge that a major home remodel that includes the kitchen and bathrooms will be what adds the most value to the home. These two areas are also the most expensive areas to renovate. Upgrading your kitchen could easily cost you up to $75,000 if you go first class all the way. Kitchen cabinets are a very expensive item but will usually give you a good return on your investment. Built in stoves and ovens are also very popular but cost more than the standard stand-alone stove. Counter tops come in all kinds of different materials and colors. Marble and stone are the most durable but also the most expensive

Another important part in a construction loan is how much of the project cost the lender will be willing to lend. If the land is already owned by the loan-taker, then that can be considered equity on the loan.

Many homeowners use construction-to-permanent financing programs. This is where the loan is converted to a mortgage loan after the certificate of occupancy is issued. This makes for only one application and one closing. Simplifying the process in this way is a great and a very effective, time-saving idea.

Building a new home can be both an exciting and harrowing experience. If you do some research, follow some guidelines, and make sure you partner with a bank that has experience then you can reduce the issues that may come up during construction.

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Dont forget that you can download a great remodeling construction loan ebook 15 things you should know before you even think about applying for a remodeling construction loan.