New House Construction loans are different from loans used to buy existing homes, or what is called a refinance. Mortgages used to purchase homes that are already built, using the house as collateral for the loan. If in case you can not make scheduled payments on the mortgage, the bank takes ownership of the house and will sell for the amount of the loan.With a home loan new construction, no home to use as collateral, because the house is still to be built. In that case, the bank will have its word to guarantee the loan. It would be nice if banks could simply consider his word for it, but when hundreds of thousands of dollars and millions of times are at stake, John Smith's signature is not enough for the bank to simply hand over a check so you can begin construction.
Due to the nature of the process of housing construction, the funding process on a home loan for new construction is more strict. Once the lender has agreed to borrow money to build new homes, a program will be highlighted once again. This program is a tie, the lender tells how the loan will be disbursed.
Typically, new housing loans are given in increments of 25%. 25% of the loan amount will be given to you by the lender, completing 25% of its construction. The lender requires an assessment of progress to ensure that said work is completed.
