Questions to Ask About Your Home Loan

September 18, 2020

Are you thinking about buying a home, or considering applying for a construction loan to build a house on your own lot? There are some important questions to ask about home loans that could determine whether you buy an existing construction house or decide to apply for a One-Time Close mortgage to build rather than buy.

How to choose the best option for you? Some prefer building because they can influence the final outcome of the construction and help determine the nature of the house ahead of time; others prefer the idea of looking at existing homes and deciding which might be the best fit. Which is best for you?

What’s Your Timeline?

If you want to apply for an FHA One-Time Close (OTC) construction loan, it definitely pays to be in a position to take your time. The home you get with an OTC loan will have a design you approved, but building the house, getting the inspections, and taking possession of the home may take longer than buying existing construction.

And for many borrowers (even first-time home buyers can apply for an FHA or VA construction loan) don’t mind the wait thanks to the trade-off of getting to approve the design.

If you ARE in a hurry, a construction loan won’t be the right one for you. Instead, consider your options with a loan such as the FHA 203(b) purchase loan, which is the standard mortgage for those interested in buying an existing construction house. You can also apply for an FHA condo loan, a mobile home loan, modular home loan, etc.

Which Is More Important, Design or Location?

For some, location is no big deal. But consider the needs of a new family; if you need to buy a home located close to child care, schools, pediatric care, or other concerns, the question of whether to build or buy may depend greatly on the availability of the purchase you need in the location where you need it.
 
You may find plenty of undeveloped lots to build a home on, but if none of those lots are close to the services you need, you may find yourself doing some home loan planning in the existing construction department rather than building yourself.

Future Plans for the Home

Do you plan to stay in your home long-term? If you are a military officer about to retire from the Air Force, for example, are you looking for your forever home? Building instead of buying may be a smart choice in such cases. But a new family expecting to add another member at some point down the line may be purchasing a home knowing they will sell in a few years and move on due to the changes in their family situation. For borrowers like these, buying an existing home may make more sense than having a house built to suit.
 
For best results, discuss your needs with a participating FHA lender and learn what your best options are today.

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