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Construction Financing 101: What You Need to Know Before Building Your Dream Home

Are you planning to build your dream home? One of the most crucial aspects to consider is financing, without which, your construction project may remain a dream. Before you can start building your dream home, it’s important to understand construction financing and how it works. Read on to learn the basics of construction financing and how Axiom Mortgage Solutions can help you finance your dream home project.

What is construction financing?

Construction financing is a type of loan that helps finance the construction of a new home or renovation of an existing one. The loan is used to pay the contractor, builder, or subcontractors for their services and to purchase materials required for the construction process. The loan is usually provided in increments as the construction progresses, and the lender will conduct regular inspections to ensure that the project is on track.

Types of construction financing

There are two types of construction financing: a construction loan for a ground-up construction and a renovation loan for homes that need major renovations. A construction loan is used for a project that involves the construction of a new home, while a renovation loan is used to improve an existing home.

How does construction financing work?

Construction financing works differently from traditional mortgages. The amount of money required for the construction process is not released in a lump sum, like with a mortgage, but rather in stages, also known as “draws.” Draws are typically disbursed based on the amount of work completed, as agreed upon in the construction contract.

Construction financing typically includes interest-only payments, not amortized payments. You’ll only pay interest on the amount of money drawn down, rather than on the entire loan amount. Once the construction process is complete, the loan is either converted into a mortgage or paid off in full.

Financing a new construction project involves a lot of paperwork, approvals, and planning. But, with the help of a mortgage broker like Axiom Mortgage Solutions, the process can be less daunting. Axiom Mortgage Solutions has a team of experienced and knowledgeable mortgage brokers who can help you understand construction financing and find the right loan for your project.

Axiom Mortgage Solutions will work with you to assess your financial situation, the cost of the project, and other factors such as the value of the property, the contractor, and the timeline for completion. They will then present you with a range of loan options that suit your needs. Axiom Mortgage Solutions will also help you with the application process and communicate with the lender throughout the construction period.

If you’re planning to build your dream home, it’s important to get started on the financing process early. With the help of Axiom Mortgage Solutions, you can finance your home construction project without any hassles. Contact us today for a consultation and let us help you achieve your dream of building a new home.

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