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Financing A Custom Built Home by Richard Conard
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Financing A Custom Built Home |
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Real Estate
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Who doesn’t want their own custom home? Not too many people would decline the possibility. While buying a home would fulfill most people’s dreams, building to your own specifications elevates the experience. Before your imagination runs wild, there is a significant amount of energy that must be spent on learning about the custom-home building process. One of the most important issues is financing.
Organizing your financing options is critical. There are endless possibilities that you have regarding style, fixtures and finishes. The word upgrade becomes fearsome. Meeting with your home builder to help with these choices is key. Prior to seeking out a loan, one must request their own credit reports, and address any negative or inaccurate data. When you do intend to apply for the loan, you want your credit as spotless as possible. After this, you will need to arrange construction financing for the project, unless you are paying cash for your home. You should ask your team of professionals for recommendations of a lenders, as a past lender is more likely to grant another loan. Choose a lender with vast experience, and be wary what companies you approach; don’t overshoot.
It is very helpful to have excellent credit so you do qualify for a construction loan. Building a custom home is considered risky by lenders, and they typically require at least 20% - 25% as a down payment to qualify for a construction loan. The percentage is based on a combination of the cost of the land and an estimation cost of the construction. The lender will do a credit and background check of both you and the home builders. Most people are not aware that part of the risk of building a custom home is the possibility that the builder might not fulfill the contract.Lenders usually require a cash reserve for borrowers who are building a custom home to verify that the buyer has funds in place for prolongation of the construction.
There are two ways a lender will handle a construction loan. The first is a One-time closing. The lender will approve an interest-only loan for six to twelve months while the home is being built. After the home is finished, the loan then converts to a 29-year fixed-rate loan. Once the construction is complete, there will be a conversion fee and an appraisal. Most lenders find a single loan is too risky. Often, the second way lenders handle a construction loan is a Two closing scenario. In this case, you take out an interest only construction loan while your home is being built and then refinance. Hence, you take out 2 loans, and you will have to pay closing costs twice.
The end result of the loan process is highly anticipated. If all parties work in conjunction with each other, the satisfaction of living in a home made and built by your own creation can be everlasting.
Author Bio:
This article is penned by Richard for Bluestone Custom Homes LLC who are custom home contractors and help home owners with home modifications and build on your lot homes.
Related Articles -
custom home builder, Custom home builders, custom home building, Custom home contractorsm, Home Builders, build on your lot homes, home modifications,
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