If you’re ready to upgrade to a larger or higher-quality home, or new home you’re probably already considering whether a custom home is right for you. The custom route is the sure-fire way to get exactly what you’re looking for, no matter what that may be. Of course, buyers who are new to the custom homebuilding process often have a lot of questions. One of the most common ones revolves around financing. Most people are accustomed to how financing works for a traditional mortgage. But how does financing a custom home differ? Of course, financing for a traditional, pre-built home involves the purchase price of the house, as well as your closing costs. Financing a custom home, on the other hand, includes the purchase price of the land (if you don’t already own it), the cost to build the home, the cost to develop the site, the design and specifications, as well as the lenders capacity to pay and all other closing costs.
The Financing Process
The process of financing a home varies slightly depending on whether you are buying an existing home or building your own. Financing a pre-built home is a one-step process, in which the buyer obtains a loan through a mortgage lender. Financing for a custom home is a two-step process:
1. First, you obtain a temporary loan to get the project started. This is a standard construction loan that includes the cost of your land.
2. When construction is complete, you refinance your initial loan to obtain a regular mortgage.
Construction Loans
Your initial, temporary construction loan kicks off the building process and covers the cost of your land. To secure the best loan for you, look for a lender that offers construction loans at competitive interest rates with little or no money down or even make your land as collateral. Building a new home on your own land gives you the unique opportunity to build . As you can see, the process of financing a custom home is much different from a traditional mortgage. To ensure you get the best rate possible, as well as loans that meet your specific needs, look for a lender that specializes in custom home financing. Seek out a company that offers construction loans with little or no down payments, and will meet your needs for permanent financing options. Most importantly, find a bank that will work closely with you and keep you well informed throughout the entire process. Building your first custom home can feel a bit daunting at first, and you want a lender that makes financing a hassle-free part of the process. Partner also with a builder who can assist your home financing process. Ready? Lets Talk! Make us your Homechoice!