Finances And Mortgages: How To Build A House

Building your own house takes finances and planning. Advice that will help you get through the construction phase.

Building a house is part of the American dream. But, sometimes a "dream" is all it is, unless you can find a way to finance your new home. Unless you're rich and money is no object - and how many average Americans are - then there are lots of choices to make and many hurdles to cross before you can think about choosing the building plans. Fortunately, banks and finance companies approve mortgage loans every day. And, as long as you have a steady income and you meet some other criteria, you may find your dream of building a house a turning into reality.

The most direct way of becoming a home owner is to borrow the money you need from a lender. But, first, you will need to organize your finances and find out where you are at. If you have a credit report, but it's at least six months old or more, you need a recent one. You can order a credit report by doing an online Internet search. TransUnion, Equifax, and Experian are the three largest credit reporting agencies. Once you receive your credit report, examine it to make sure it is correct. If you suspect that it has errors, you will need to dispute them. Contact the credit reporting agency in writing and explain the suspected errors. They will investigate the situation and contact you back.

The next step is to figure out how much money you can afford to pay on a mortgage loan. This can be as simple as adding up your monthly net income and subtracting out your regular monthly bills. But, if you currently own a house, you will need to talk to a realtor to determine how much you can sell it for. If you have a mortgage loan on your house, it will, of course, have to be paid off first. Hopefully, you will have enough money left from the sale of your house to meet the down payment the bank or finance company will require. To give you an idea of how much money you need upfront, down payments on a mortgage loan can be as low as five percent of the total amount borrowed. That means that a house loan of one hundred thousand dollars would require a down payment of at least five thousand dollars, for example.

If you have credit card debt, paying that off before you talk to a bank or finance company will increase your chances of obtaining a mortgage loan. If you have enough money left from the sale of your house, you could pay your credit cards off then. A potential lender can help you decide what you need to pay off.

Now you're ready to shop for your mortgage loan. Don't settle for the answers from just one or two banks or finance companies. Compare loans and the interest rates from four or five different lenders. Obtaining a low interest rate is important, but be sure that you look at the other factors of a loan, such as other fees and upfront points. If you're not familiar with a "point", it's a unit of prepaid interest. Each point you pay equals one percent of the amount of the loan. Therefore, each point you pay for upfront, the lesser your house loan rate will be.

After you have decided on a lender, you will then need to fill out a loan application. You'll need to take some paperwork with you, such as proof of income, (for your spouse too, if you are married). The loan officer at the bank or finance company will use the information on your loan application, your credit report, financial information about the house you want to build, and the amount of your down payment to determine if you can get a loan, and for how much. You'll have to be patient at this point in time, because it can take between two to four weeks to receive an answer from the potential lender. In the mean time, if the bank or finance company requests additional information, get it to them as soon as possible. Otherwise, you will hold up the process, and you certainly don't want to do that.



Finally, after your mortgage loan is approved, you and the lender will need to finalize the loan. This will take another week or so to complete. Then, after you have your financing, you can begin looking at the building plans for your new house. Building a house is part of the American dream. But, sometimes a "dream" is all it is, unless you can find a way to finance your new home. Unless you're rich and money is no object - and how many average Americans are - then there are lots of choices to make and many hurdles to

cross before you can think about choosing the building plans.

Fortunately, banks and finance companies approve mortgage loans every day. And, as long as you have a steady income and you meet some other criteria, you may find your dream of building a house a turning into reality. The most direct way of becoming a home owner is to borrow the money you need from a lender. But, first, you will need to organize your finances and find out where you are at. If you have a credit report, but it's at least six months old or more, you need a recent one. You can order a credit report by doing an online Internet search. TransUnion, Equifax, and Experian are the three largest credit reporting agencies.

Once you receive your credit report, examine it to make sure it is correct. If you suspect that it has errors, you will need to dispute them. Contact the credit reporting agency in writing and explain the suspected errors. They will investigate the situation and contact you back.

The next step is to figure out how much money you can afford to pay on a mortgage loan. This can be as simple as adding up your monthly net income and subtracting out your regular monthly bills. But, if you currently own a house, you will need to talk to a realtor to determine how much you can sell it for. If you have a mortgage loan on your house, it will, of course, have to be paid off first. Hopefully, you will have enough money left from the sale of your house to meet the down payment the bank or finance company will require. To give you an idea of how much money you need upfront, down payments on a mortgage loan can be as low as five percent of the total amount borrowed. That means, that a house loan of one hundred thousand dollars would require a down payment of at least five thousand dollars, for example.

If you have credit card debt, paying that off before you talk to a bank or finance company will increase your chances of obtaining a mortgage loan. If you have enough money left from the sale of your house, you could pay your credit cards off then. A potential lender can help you decide what you need to pay off.

Now you're ready to shop for your mortgage loan. Don't settle for the answers from just one or two banks or finance companies. Compare loans and the interest rates from four or five different lenders. Obtaining a low interest rate is important, but be sure that you look at the other factors of a loan, such as other fees and upfront points. If you're not familiar with a "point", it's a unit of prepaid interest. Each point you pay equals one percent of the amount of the loan. Therefore, each point you pay for upfront, the lesser your house loan rate will be.

After you have decided on a lender, you will then need to fill out a loan application. You'll need to take some paperwork with you, such as proof of income, (for your spouse too, if you are married). The loan officer at the bank or finance company will use the information on your loan application, your credit report, financial information about the house you want to build, and the amount of your down payment to determine if you can get a loan, and for how much.

You'll have to be patient at this point in time, because it can take between two to four weeks to receive an answer from the potential lender. In the mean time, if the bank or finance company requests additional information, get it to them as soon as possible. Otherwise, you will hold up the process, and you certainly don't want to do that. Finally, after your mortgage loan is approved, you and the lender will need to finalize the loan. This will take another week or so to complete. Then, after you have your financing, you can begin looking at the building plans for your new house.

© High Speed Ventures 2011