Building a house is a landmark event in any person’s life. The decision to build a house comes after a long analysis of the sources of funds to facilitate the process. Luckily, there are a lot of lending companies that offer loans targeted at new home construction. New home construction loans and stated income construction loans are the two types of loans that are offered to people in the process of constructing a new home. Both types of loans offer funding for new home construction, but the difference lies in the way in which they can be obtained.

The first and very crucial step in obtaining a home construction loan is choosing a lender. New home construction loans are offered by all major national lenders and can also be obtained from regional banks or mortgage companies. The important point to note is that the lender must be kept informed of anything and everything that has been planned about the home construction. Typically, the interest for a new construction loan is paid over a period of 12 months, and then replaced by a mortgage, once the home’s construction has been completed.

New construction loans themselves are of two types. The first type is known as the all-in-one loan, in which the loan is automatically converted to a regular mortgage on completion of the construction of the home. The second type is the construction-only loan, which as the name suggests covers only the construction costs of the home. This type of loan is due as soon as the construction is done and must either be paid off or replaced by a mortgage. Lenders have very specific ways of paying for the construction of the home. The payment of funds is divided in to several “draws”. The home-owner must draw up a plan at each stage of the building process clearly stating how much funding was used at that particular stage of construction. For example, a draw can be done after the pouring of the foundation of the home, or maybe during the framing of the home. This drawn up plan is then sent to the lender, who examines it and allocates the funds to be paid.

The other type of home construction loan, called the stated income construction loan is a loan that does not require the verification of the home owner’s income. This type of loan is a boon and is best suited for self employed individuals. Anyone who cannot produce verification documents for their income, or chooses not to reveal their earnings can benefit from this kind of loan. The benefit of a stated income construction loan is that it is generally approved much faster than other kinds of loans. The downside to this type of loan is that the interest rates associated with it are much higher than other loans. Correspondingly, the down payments are also significantly higher. The procedure to apply for a stated income loan is quite simple and all it requires is an online application or a direct application at the office of the chosen lender.

Meghna Arora asked:


The prospect of having a home is every individuals desire and dream. An individual spends his entire savings only for this reason. But with the entire savings purchasing a home is not possible. It may look easy for the one who are affluent but for some other individual, arranging the necessary finance is a daunting task. With the upward tilt in the prices of real estate, it becomes even more difficult. Now, to assist borrowers in buying their prospective homes, lenders and banking institutions are providing New Home loans.

New home loans have got popularized within a short span of time. At present it is the most sought after loan by borrowers who are in the process of buying a new home. . The loan is worthy of its name. It is estimated that transaction worth billions of pounds has taken place from banking and financial institutions and the numbers are increasing by the day. New home loans are of two types. They are

Fixed rate new home loan

Variable rate new home loan.

Fixed rate new home loan: The rates of interest are fixed in the case of fixed rate new home loans. If you avail the loan, the rate of interest will be kept same for the whole repayment period. Even if the interest rate goes up, you have the benefit to pay the same interest rate.

Variable rate new home loan: In the case of variable rate new home loan, the interest rate you get is initially lower. Depending on the fluctuations on the market, if the interest rate increases, you have to pay the new interest rate.

New home loan is designed such that you get the loan at affordable rates of interest. The growing popularity of the loan has compelled the lenders to provide new home loans through online. The online mode helps the borrower to access the loan in a fast paced manner. By just clicking a few buttons and sitting in your home or office, you can access the loan.

New home loans beckon a ray of hope for borrowers who cannot afford to buy a home on their means.