Conventional Financing
A conventional mortgage meets all of the funding criteria of Fannie Mae and Freddie Mac. About 35-50% of mortgages, depending on market conditions and consumer trends are conventional mortgages. These types of mortgages may be fixed-rate or adjustable-rate mortgages.
For a conventional mortgage, you will need between 5% and 20% for a down payment. The benefit of these types of loans, however, are the fact they fact they usually have a lower interest rate.
FHA Loans
The Federal Housing Authority (FHA) has loans available to those who qualify. These types of loans only require 3.5% down for a down payment. A majority of Charleston Homes buyers chose the FHA financing because of the flexibility it offers in down payments.
This type of loan is great if you don’t have a large amount to put down on a home or you don’t have stellar credit. The Federal Housing Authority was created in 1934, after the Great Depression, to stimulate the housing market. It did when it was first created and continues to do so to this day.
The Two Loan Approach
This type of home financing option takes out two separate loans. The first loan is a construction loan for the construction time period of the home. For the second part of the loan, you can use either an FHA loan or conventional financing for the end loan.
A construction loan can be used on any construction of your new home throughout the building process. Once the building process is complete, you can then finance the rest of your home through the other two loan options. At Charleston Homes, we give you a special incentive to choose this type of financing.
Construction loans are known as “story loans.” That means the lender must know the story behind the planned construction before giving an applicant the loan. These types of loans generally are variable rate loans. They are priced at a spread to the prime rate loan or some other similar short term interest rate. The buyer, the contractor, and the lender establish a draw schedule based on the stages of construction and, as a result, the interest is charged based on the amount of money distributed to the home buyer to date.
There is no reason you can’t apply for a loan today to have Charleston Homes start planning your next home from the ground up. With several loan options available, many people qualify for one or more types of mortgage loans. The question becomes what type of loan best fits your home buying needs. That and when and where you will move into your new Charleston Home!
