The first true step in custom home building is getting your finances in order. By preparing certain financial aspects ahead of time, such as the projected budget, the loan choices available for construction, and which financing options are the most appropriate, you can start building your dream home on the right note. Ensure a smooth custom home build financing process by considering the following advice.
Loan Choices
Depending on your financial situation, there are several loan options that can assist you with your specific needs:
- FHA loans for first-time home buyers with a flawed credit history or limited funding for down payments.
- VA loans for veterans that do not require down payments but have some housing restrictions.
- Conventional loans that allow for large down payments but have some strict rules and may include add-on fees.
The best option for custom home building is a construction loan, which specializes in providing funding for home buyers who build their own house or work with professional builders. Most construction loans provide short-term funding for construction and charge special rates before turning into a traditional mortgage loan after construction, while others require reapplying for a mortgage. The former choice, known as the construction-to-permanent loan, creates less financial strain.
Gather Your Information
Whether looking for pre-approval or applying for a construction loan, make sure you have your financial information ready. Some of the information you should prepare includes:
- Primary and secondary income
- Tax information from the past two years
- Recent bank statements for checking and savings accounts
- Investments
- Credit report
- Down payment information
- Builder’s license and information, if applying for a loan
Construction loans have no collateral, so you must ensure a strong credit history, financial documentation, and down payment (between 10 to 20%) to justify the risk. You should try to get pre-approved before looking for a builder, as it can help you determine your budget before planning your home.
Choose the Right Builder
Find a custom home builder with a strong reputation that can finish projects on time and within budget. A builder will help you design the perfect home and create a target budget for the construction loan. Keep in mind that some builders will offer their own financing plans or have their own relationships with certain lenders or banks, which can ease the loan approval process.
Pick a Local Lender
Just like with a builder, look around for a reputable institution with the best loan, interest rate, and down payment options. Local lenders are recommended, since they have a stronger understanding of the area market and likely have a relationship with the builder.
The team of specialists at Premier Builders will support you through every step of your house building process, from design to the final construction. Contact us today to start creating the custom home of your dreams.
Ready to create your dream home?
We would love to hear from you. Contact us to setup an appointment today. Call (419) 794-5958 or visit www.nwohomebuilders.com.
Premier Builders are not financial professionals. This article is meant for entertainment purposes only. Please consult an accountant, financial, and/or banking professional for more information.
