What is covered under a construction loan?

My husband and I are considering building our own home. We have gone to the bank and know the basics of the loan itself but we were wondering what is covered under a construction loan. Are we able to buy things to finish the house such as appliances (stove, refrigerator, etc.) or does that have to be bought on our own? Can we buy furniture? I'm sure that this may depend on the banks rules but maybe someone could give us some idea of what we are getting into. Any help would be appreciated!

Thanks!

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  • 10 years ago
    Best Answer

    It covers 75% of your estimated construction costs, you give them the 25% up front. The structure is covered, as well as a driveway and installed appliances. No furniture, nothing not literally attached to the building. You will have a problem once you complete though, as you have to convert to a conventional loan, and there is just no way your house will appraise for 75% of the building costs. Maybe half, if you are freaking lucky. The monthly fees for not converting or not completing on time will be killer. MANY people loose their custom houses before they even move in.

  • 10 years ago

    In order to convert your construction loan into a conventional loan upon completion of your new home. The REAL ESTATE alone must support the value which served as the basis for the loan the lender made to you.

    In most (virtually all) instances, you are wanting to go conventional when your new house is done in order to save big $$. Even if YOU don't want to, you probably don't have a choice as most lenders have time limits on how long they are willing to extend construction credit.

    For any particular item to be included in your end loan, it generally must be considered as a real estate fixture. That is, it must be attached to the land in such a way as to be considered permanent. Furniture is definitely out of the question, but appliances are a different story...

    By strict textbook definition, free standing appliances like refrigerators and ranges are considered as personal property, while built-in dishwashers, garbage disposers, microwaves and the like are considered as fixtures. In some cases, lenders sort of look the other way when a complete appliance package is included in the valuation conducted by an appraiser. Usually, they are only willing to do this in markets where appliance inclusion is customary practice on the resale market (not the case in all locations). From what I've seen, if a case can be made that comparable properties being used to establish your value included a similar complement of appliances to what you are proposing you will most likely be ok...no guarantee though, so ask your lender.

    Source(s): Licensed appraiser, Licensed Sales Broker. 15 years active experience.
  • 3 years ago

    Loan For Furniture

  • Anonymous
    6 years ago

    As we were in the same situation like you and did an online research what is covered under a construction loan we got overwhelmed with information.

    Fortunately my wife found the following website and with a couple of clicks we gathered all needed information.

    http://mortgageloancheck.com/

    Enjoy your research!

    Eben

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  • 10 years ago

    Construction of the property with built-in fixtures and appliances. Built-in dishwasher is fine, the fridge which you can move if you leave is not fine. Furniture, no. As soon as it is complete you must already have permanent financing. Your construction loan will be contingent on you securing a permanent mortgage in advance and setting a completion date.

  • 10 years ago

    a; fyi, in 95% of all circumstances for the next 1-3 yrs, you can buy a home and modify it

    for 1/2 the price to build new.

    b; UNTIL an appliance is connected, it is chattel. Post connection, it becomes realty.

    c; few lenders will allow a RE loan to include same

    Source(s): RE broker
  • Brion
    Lv 6
    3 years ago

    For Finance and credit solutions I always visit this site where you can find all the solutions. http://INSURANCEANDFINANCETIPS.INFO/index.html?src...

    RE :What is covered under a construction loan?

    My husband and I are considering building our own home. We have gone to the bank and know the basics of the loan itself but we were wondering what is covered under a construction loan. Are we able to buy things to finish the house such as appliances (stove, refrigerator, etc.) or does that have to be bought on our own? Can we buy furniture? I'm sure that this may depend on the banks rules but maybe someone could give us some idea of what we are getting into. Any help would be appreciated!

    Thanks!

    1 following 9 answers

    Source(s): For Finance and credit solutions I always visit this site where you can find all the solutions. http://INSURANCEANDFINANCETIPS.INFO/index.html?src...
  • Kokita
    Lv 4
    4 years ago

    it is a piggy back loan to some banks. one to buy the land, another to build on it and a last one to pay off the first two, called a TAKE OUT.

  • Sug
    Lv 5
    10 years ago

    It pays for the structure. Anything not bolted down is considered personal property and is not included in the homes value.

  • Anonymous
    10 years ago

    c

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