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New Mexico Construction Loans-What You Need to Know

New Mexico Construction Loans-What You Need to Know

Are you looking to buy or build your new home? If so, the first step is to determine how much house you can afford. Banks aren\'t lending like they used to, due to the housing crisis. Where do you turn when this is the case if you are in need of  New Mexico construction loans? Many companies now specialize in construction loans. This type of loan differs from a traditional loan in that it is a one-time close, one set of loan fees which are then converted to a perm or permanent loan.

When building a new home, one needs to obtain a new mexico construction loan rather than a mortgage. This type of loan may be prime based, interest only based on the amount that is paid out. When the permanent phase takes over, one has two options. Lock First sets the permanent financing before any construction begins. This locks the rate in up front. The other option is referred to as Lock After. Here the permanent financing is floated until construction is complete.

With new mexico construction loans, the terms vary greatly. Some construction loans are for a four month period while others are for 24 months. Six, nine, 12, 15, 18 and 21 month loan terms are also offered. Interest rates are required standard and may be waived in certain situations. Contingency reserves are required standard also.

This is 5% on Ground Up construction and, again, this may be waived in certain situations. The owner is not allowed to act as builder with a construction loan. He or she may do so by exception only. Otherwise, a licensed contractor must act as project manager. The project manager must meet certain requirements through the construction phase also.

Draw allowances are put into place in the construction loan. If the loan is for less than six months, five draws are standard. Nine month loans get nine draws, 12 to 15 month loans get 14 draws and loans over 18 months have 18 draws. If additional draws are needed, they are available for $150 each.

If the loan requested is for more than $1,000,000, two appraisals must be required and the appraiser must be on a list that is approved by the lender. Other requirements must be met. This is a basic overview of construction loans in New Mexico. Speak to a lender if you wish to know more.