How To Secure DIY Home Construction Loans
What is a DIY home construction loan?
Even though do it yourself “DIY” projects may be cheaper than hiring a professional, the tools and materials can still be costly. The good news is that the more tools you accumulate the more DIY projects you’ll be able to complete in the future. Perhaps you can help your friends too or turn your handyman or handywoman skills into a side hustle. So how do you afford the tools and materials if you don’t have enough cash on hand? Most people use a credit card or personal loan to help pay for DIY home construction projects. The advantage to using a personal loan is that it can have higher loan amounts and lower interest rates compared to most credit cards. All credit types can qualify for personal loans. In some cases it may make sense to use a home construction loan. Keep reading to learn about the various options you may have for financing DIY home construction loans.
What are DIY loans?
Most likely if you are using a loan for a DIY project you will be using a personal loan, credit card, or home improvement loan. If you are using one of these types of loans you can be approved for up to a certain amount at a fixed interest rate. Most personal loans and credit cards do not monitor or regulate how you spend the money. This means you may want to borrow extra and get multiple home improvement or home construction projects completed.
Can you build your own home with a construction loan?
Yes, you can build your own home using a construction loan or mortgage. However, the repayment terms are usually short. Most lenders have a one year maximum loan term. When you calculate the cost of building a home there’s a good chance that you will need more than a year to repay the loan. For this reason many people choose to use a personal loan instead. Personal loans offer repayment terms up to 12 years and loan amounts up to $100,000. In addition, personal loans typically offer fixed rates while construction loans usually offer high variable rates. Having a fixed interest rate means that your rate will stay the same throughout the duration of the loan. This can make the timeframe for paying off the loan and staying on budget much more predictable. Having a variable interest rate means that your interest rate can change during the duration of the loan.
What is required for a home construction loan?
In most cases, construction loans are classified as high risk loans for lenders. This means that the borrower typically needs a high credit score, solid credit history, and a 20% to 25% down payment. The planned construction and cost of the land can determine how much down payment will be required. However, if you already own the land you are going to build on it can be used as equity. Compared to construction loans, personal loans are much easier to qualify for and usually require no down payment or collateral.
Is it possible to get a personal loan to build a house or DIY home construction project?
Personal loans can be used for just about anything. This means that if you secure a personal loan and want to use the money to build a home…you can! It also means that if you secure a personal loan and want to use the money for a DIY home construction project… you can! If you need a way to finance the land you are building on you should look into a land loan or home equity loan.
Is it cheaper to buy or build a house?
In most cases it’s cheaper to buy a house versus build a house. However, building your home allows you to customize and design every inch of your new home. The reality of building your dream home from the ground up can be priceless. If you are given land to build on it may be cheaper to build your own home. Whether you decide to buy a home or build a home, you will most likely be making a rewarding long term investment.
How long is a typical construction loan?
Most construction loans have a one year maximum for repayment. Construction loans usually only last for the amount of time it takes to build your new home.
DIY Home Construction & DIY Home Project Loan Options for 2020:
Personal loans can be an attractive option for all credit types looking for a DIY home construction loan. They can be easy to secure and even easier to qualify for. Acorn Finance is a secure platform that allows you to receive multiple personalized loan offers within seconds. To get started you can submit one application online that does not affect your credit score. Acorn Finance partners with dozens of reliable lenders that offer personal loans up to $100,000 with rates starting at just 4.99%. Most personal loans offer repayment terms up to 12 years.
Most likely you have a credit card handy in your wallet that is easy to swipe and spend money. In addition, you may even be able to rack up some reward points. However, if you need to borrow a larger amount of money that will take you a while to pay off, credit cards might not be your best option. Compared to personal loans, credit cards can have much higher interest rates. If you have a high balance on one or multiple credit cards it can also affect your credit score.
Let’s say you are selling or living in your current home while building a new home. You need a short term solution for financing the new construction project. Once your current home sells, you can repay the construction loan. If this describes your situation or similar, a construction loan can be a great option. Most construction loans offer terms with a maximum of one year. If you need longer repayment terms you should look into personal loans.
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Getting pre-qualified for a personal loan can set you up for success while aiding you in better financial planning.