When you buy a pre-built home, you are essentially borrowing money from a lender to pay for most of it upfront. This is a traditional mortgage (in simplified terms). With a construction mortgage, the upfront amount you borrow is not to buy a pre-built home; it is to pay for the construction of a future home. Since the home does not yet exist, you are lent cash funds to create it, based on the premise that it will be worth something of tangible value, in due time. In either scenario, you pay the lender back for something. A construction mortgage simply makes it possible to take out a large loan so you can build your dream house. Now, this can sound too good to be true. In a way, it is. This type of scenario works well for those who are experienced at home building projects, or who have the resources to hire someone who is. The mortgage application will require documentation on several stages of your project, before they begin (see more below). Everything from land surveys to obtaining an occupancy certificate must be planned in advance. That includes utility connections, road access, foundations, roofing, electrical fittings, drywall, paint and the whole shebang. Timelines matter a lot, too; lenders want to know that their money is being used wisely, and for profit. In a positive way, this will keep you diligent to stay on schedule. But if you can’t, for whatever reason, you’ll end up ‘in a pickle.’ Please see more on our website.