Talking about finances isn’t always an interesting topic. However, when it comes to building your dream custom home, it’s very important.
Your funding decisions will shape every aspect of your custom home project. It ranges from where you build to the materials and features you include. So, how do you secure the financing you need? And, how do you know which type of funding is best for your needs?
Don’t worry! We’ve got you! In this post, we’ll answer some of the most frequently asked questions about construction loans, land loans, and home builder financing. We’ll help you make informed decisions for your dream home journey.
Understanding Construction Loans
Let’s start with the basics. What exactly is a construction loan?
A construction loan covers the costs of building a custom home. It includes land, design fees, building materials, labor, and permits.
These are short-term loans with higher interest rates than other loans. Meanwhile, lenders view construction loans as riskier investments. This is because there is no existing collateral (e.g., the home itself) to secure the loan. As a result, lenders often require a significant down payment, usually around 20 to 30 percent of the total project cost.
The loan duration usually aligns with the construction timeline. It’s typically about a year. Throughout the construction process, your lender will conduct inspections to ensure the project is progressing as planned. So, you’ll get the funds in installments according to these inspections. Additionally, the borrowers are responsible for interest payments when they receive the funds.
Types of Construction Loans
Now that you understand the basics, let’s explore two common types of construction loans. First, the construction-only loan. Second, the construction to permanent loan.
Construction-Only Loan: This type of loan requires you to pay back the total loan amount or secure permanent financing (such as a mortgage) once construction is complete.
Construction-to-Permanent Loan: With this option, the loan transitions into a mortgage once construction is finished, eliminating the need for additional financing and potentially saving on fees.
Financing Options For Your Custom Home
In addition to construction loans, there are other financing options to consider:
Land Loan: Did you find the perfect lot but still not ready to build? Perhaps, a land loan can provide temporary financing until you’re ready to start construction.
Home Builder Financing: Some builders offer financing options directly to their customers. Often, they’re in partnership with financial institutions. While convenient, it’s essential to compare offers to ensure you’re getting the best deal.
Ready to Build Your Dream Custom Home?
So. securing the right financing is just the first step on your custom home-building journey. Also, for a guide to the entire process, get in touch with Dawol Homes. We’ll help you from budgeting to choosing a land and beyond.
Embark on your dream custom home journey with confidence and let us help you turn your vision into reality! Call Dawol Homes now.
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Dawol Homes
9404 Hwy 17 Bypass,
Murrells Inlet, SC 29576
(843) 294-2859
Dawol Homes Sales Office
3100 Dick Pond Rd # E
Myrtle Beach, SC 29588
843-294-2859
We build homes in: Cypress River Plantation, Waterway Palms, Waterbridge, Murrells Inlet, Collins Creek, Bellwood Landing, Carolina Forest, Plantation Lakes, North Myrtle Beach, Socastee, Surfside Beach, Pawleys Island, Litchfield Plantation
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