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Getting the money you need to build homes in the United States, such as your garage or your house, can be complicated. It depends on how much your home is worth, your income level, and your credit score, in addition to other factors. Although there is no loan to build specifically for a garage as such, your project could be eligible to participate in a government loan program, either long-term or short-term. Reviewing your options for remodeling or building a new garage will help you choose the best one for your needs.
Gather the required information
To get any type of loan, you’ll need to show lenders or borrowers that you can get credit because you’re a good fit, so prepare the following information to give to potential lenders.
- Phone number
- Social Security number
- Tax returns for the last three years
- Credit report
- Credit score
- Latest bank statement
- Appraisal of your house
- Title to any property you intend to offer as collateral
- If it exists, information on the endorsement or the person who will support your commitment
- Plans and project permits, builder and budgets
You can give lenders your credit information and score early on when you’re looking at your garage loan options. They will do a detailed investigation, which could change your score, of at least one of your credit reports and one of your credit scores before informing you of their final decision. A lot can change between your first meeting with a lender and the time you’re ready to sign the loan papers, so lenders will want the latest facts.
Apply for a mortgage-backed building loan
If you’ve made enough mortgage payments on your home, if it’s appreciated in value, and you’ve put down a down payment, it may be worth enough for you to get a home loan to cover the cost of your garage. The way you apply for and get a home equity loan is the same as when you apply for a mortgage loan. It’s a new loan, but since you now have collateral, it may be easier for you to get this second mortgage. Some banks have an online simulator that can help you calculate the rates you will pay with a frequently asked questions section where you can ask some of your questions.
Apply for a HELOC
Another financing option is a home equity line of credit ( HELOC ) where you don’t commit to paying a certain amount for a set period of time. You are asking to be credited for a specific amount, but you will only pay for the funds you use. Think of a HELOC as a credit card. In this way, you will not have to pay interest for all your credit, but only for the amount that you use.
The HELOC is similar to a home equity loan in how you apply for it and how you get it, plus both options are a second mortgage on your home. However, if you apply for new funds from your line of credit and interest rates rise while you’re building, you may have to pay a higher rate for them than you do with a home equity loan, where a rate is set. fixed.
Mortgage refinancing with obtaining cash
Instead of taking out a second mortgage, you could request to refinance your current mortgage and negotiate a new one with a larger amount that includes the construction costs of your garage. This may be the best way to get the money for your project if you want to pool all your home debt into one loan.
Analyze the option of a personal loan and use it for construction
If the value of your house is not enough or you don’t want to risk a second mortgage, you can try to get a personal loan. It’s like applying for a credit card and you don’t need to offer any property as collateral.
You just need to have a decent, verifiable annual income, a good credit history, and a solid credit score to prove you’ll be able to make your monthly payments. And if you have someone who can sign and support your commitment, like one of your parents, even better.
Find home improvement loans
In addition to traditional mortgages, there are several commercial entities that offer loans for home repairs and that include most of the criteria that you must meet if you want any loan or line of credit. If you are interested, you can look them up online. The US Department of Housing and Urban Development . offers Title I property improvement loans, which can be applied for along with a 203(k) rehabilitation mortgage insurance policy.