It is an exciting adventure to build a custom home for yourself, but there are many things you need to know. How do we begin? Which person should we choose? What about the cost?
Your biggest investment in life will be a new home. Before excavations begin, you need to determine what you can afford to pay and how you will finance the new home construction.
Let’s talk about how to get started working with a lender, and what types of loans are available for homeowners.
Financing Your Custom Home Construction
Although some homeowners may choose to pay cash upfront, the majority of homeowners prefer to finance their custom homes with a loan. Talking to a lender is a good first step in exploring your options for building.
Ask your custom home builder to provide a list of trusted lenders if you don’t have one. There are many programs that lenders offer and some might work better for you than others.
A lender will review your financial information to determine your eligibility. Lenders will typically look at your credit score and your employment history. They may also consider your debt obligations. These factors allow the lender to assess your financial situation and create a safe financial plan. The lender will send you a pre-qualification letter after the review.
There are many loan types to choose from so it is important that you determine the type of loan that will best suit your needs. There are programs available for first-time buyers, veterans, and rural areas. Remember that a mortgage amount is usually tied to the value of your home. The appraiser will need the building specifications and detailed construction plans to assist in the appraisal process since the home has not been built yet.
Builders will either choose to finance the project themselves or use a construction loan. It is important to weigh both the pros and cons before making a decision.
A Construction Loan is a short-term loan that can be used to pay for the cost of building your house. The lender will pay the money in stages according to a draw plan. Drawings are usually made at significant milestones like foundation and framing.
The best thing about a construction loan is the fact that you only pay interest on the amount of proceeds that are distributed to the builder during as the new home construction progresses.
One of the main benefits is that the house’s price is locked in when construction begins. Construction costs can fluctuate and builders might pass on increases to their customers after construction begins.
Once the home is completed, the construction loan can be converted into an end loan. This means that you will start paying monthly principal and interest. Some convert automatically, while others may require you to settle a second loan to convert to a permanent loan.
Home builders may not need a loan for construction, but will finance the project themselves during construction. Permanent financing would be obtained through a conventional loan after the completion of construction. You then settle on the property.
The custom home builder in Myrtle Beach will often require that you provide proof of your ability to pay the purchase price. To ensure your commitment to the build, you will need to pay a large deposit upfront. The pricing of the home can change during construction and these adjustments are often passed onto the buyer. If the interest rates at the start of your build are 4% and then 6% at its end, you will be responsible for the extra 2% you don’t have to pay.
Financing through a builder is not the best option if you want to customize your home to meet your needs. Builders may be less cautious about making any modifications due to financial uncertainty.
You can also apply for a VA loan if you are a veteran. VA loans are short-term loans that are available to active military personnel and veterans to help them build a home. These loans are very similar to construction loans. This loan is available to qualified builders only.
Building a home is not an easy task. Dawol Homes has the right team to assist you with every step of your build. Call us now.
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Dawol Homes
9404 Hwy 17 Bypass,
Murrells Inlet, SC 29576
(843) 294-2859
http://www.dawolhomes.com/
info@dawolhomes.com
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