There are three ways you can get your dream house.
- Buy a completely new home with all your dream requirements
- Construct a brand new home from scratch
- Remodel an existing house to suit your lifestyle and design
Financing these options can be smooth if you have enough funds. Otherwise, it can be draining and may mess up your other payments. Home loans can be a good help in such situations. It all depends on your loan choice.
This article can help you gain insight on how home loans can help you get your dream house.
Reduce Your Cost of Dream House
You must know the cost of your dream house. If you’re tight on a budget, remember it’s always cheaper to remodel than build a new house.
But, you may be wondering: can home loans include renovation costs? YES!!! Home renovation loans can help you bring your dream home into reality through renovation. They are low-cost and don’t need your home as collateral. You’ll need just to confirm your proof of income to get home remodel loans.
Don’t forget they are quicker in getting processed and approved. Besides, they may get you more money than some home loans with fixed limits.
So, are home improvement loans a good idea? Yes, any renovations on your house are a value addition. Borrowing increases your debt and may affect your credit score.
But, a home remodel loan or a home renovation loan allows improving your property value for resale. For example, Florida attracts many home buyers from other northern states due to its sunshine weather. Hence, remodeling a fixer-upper home through home improvement loans in Florida makes it ready for resale at a premium value.
But, it is not applicable for first-time home buyers. Other home loans may be useful if you’re a first-time home buyer. Regardless, home loans are low-cost financing for your dream house because of these primary reasons:
Leverage on Tax Deductibles
Home loans come with incredible tax expense reductions through tax credits and tax deductibles. IRS supports you as a home buyer by not deducting certain interest of your loan.
There are other additional tax benefits that IRS extends. As a result, you’ll be able to increase your income due to reduced tax expenses. It’ll reduce the cost of purchasing your dream home too.
Most home buyers prefer 30-year fixed mortgages to 15-year mortgages. They spread your payments over 30 years with non-fluctuating interest rates and monthly payments. Hence, it makes them affordable. Goetz Credit Union offers housing loans with a lower interest rate which makes them affordable.
Home Ownership Assistance Programs
Home loans also attract several home ownership assistance programs at federal, state, and local levels. For instance, the Homeowner Assistance Funds can help you repay your home mortgages alongside other expenses if you’re eligible.
Also, downpayment assistance programs can help you reduce the percentage of payable downpayment. Most lenders require a 20% deposit of the value of your dream house.
Keep Yourself Safe From Fraud
Home buying scams are on the rise. You will never want to lose your hard-earned money to scammers in the name of buying your dream home. Credit unions and financial facilities can help cushion you from some frauds.
For example, financial facilities always do extensive evaluations of the property you wish to buy to reduce their risk exposure. Hence, they’ll back out of any property with too much risk profile. Otherwise, if your financing facility has approved your desired property, you may be off the risks like a fraud.
Types of Home Loans & Their Benefits
There are various home loans for first-time and second-time home buyers. Each category will give you different leverage. We’ll evaluate common mortgages and construction loans.
|Type of Mortgage Loan||How it operates||Benefit|
|Conventional loan||Has fixed rates that are spread across your tenure (30-years common type).|
It covers your dream primary, secondary, or investment property.
|Perfect if you have a higher credit score (620 & higher),|
|Jumbo Loan||Operates on 10-20% downpayment & credit score of more than 700. Only covers higher premium properties & borrowers must have substantial assets in cash.||Allows you to finance expensive houses in high-cost codes like LA, New York, or San Fransisco.|
|Government-insured loan||Operates on 1-4% downpayment of your dream||Low-cost financing that is best for low/medium-income|
Note that some mortgages have fixed rates while others are adjustable. The latter is the best fit if you aren’t planning to stay too long in your desired dream house.
If you opt for constructing your dream house from scratch to include your desired design elements, you’ll need a construction loan. Here are some of the construction loan options and how they help you achieve your dream house;
|Type of Construction Loan||How it operates||Benefit|
|Construction-to-permanent loan||Covers your house construction. But it turns into a mortgage with fixed rates when completed.||It saves you on closing costs.|
|Construction-only loan||Short-term loan with adjustable rates. After your house is complete, you have the option of paying it in full or refinancing it into a mortgage. The latter will make it two processes with two closing costs.||Leverage if you have a large amount of cash or plan of selling your previous home.|
|Owner builder loan||Only issued if you have home building experience||Perfect if you want to be your contractor.|
|Renovation loans||Like conventional mortgages, you can purchase a house and remodel it with this loan. Its structuring depends on the final value of your house. when the renovations are done.||If you are going for a fixer-upper, then a construction loan for a remodel is a perfect fit. Some are unsecured, so no worries about foreclosures.|
Note that all the first three construction loan categories use your house as collateral, including some mortgages. But, most home improvement loans are unsecured. Regardless of all this, there are some minimum requirements for most home loans.
Home Loans Requirements
- Good credit score. You’ll need about 680 credit scores and above for construction loans. However, you get government-insured mortgages with a low credit score.
- Downpayment is 20% at minimum. Other lenders may charge more and require you to have insurance (private mortgage insurance) if you pay less than 20%.
- Construction approvals. Blueprints, title deeds, and other documents may help your construction loan to get approved faster.
Buying your dream home in a perfect weather state like Florida can be challenging. But, various resources can help ease the hassle. Home loans and other government programs like the Homeowners Assistance Funds can help reduce the burden of repaying downpayment and mortgages.
You can still live the American dream by leveraging on home loans.