While many people may dream about building a custom home, oftentimes the biggest barrier to doing so involves how to finance that home. But it doesn’t have to be that way. In fact, while obtaining funding for any type of real estate purchase can involve jumping through a few hoops, if you have a good understanding of all the available options, you could find that you’re in a better position right from the start.
Unlike the purchase of an existing home, the costs of building a new residence can involve some additional components. For instance, a construction loan will typically be needed. This type of loan is usually shorter-term, such as one year or less, and it is used for covering the building costs.
The interest rate on a construction loan is usually higher than those that are offered on traditional mortgages. This is the case, even if you have good credit. When applying for a new home construction loan, the lender will typically require that you provide them with a realistic building budget and time table.
In addition, the cost of the building materials should also be included. As with most other types of home loans, a down payment is usually required before you’ll be approved for a construction loan. In most instances, this can be as much as 25%.
Before a lender will approve you for a construction loan, you will also be required to prove that you are working with a qualified and experienced builder. With that in mind, it is important to make sure that your builder has a good, solid reputation, and has the qualifications necessary for completing the project.
If you’re considering the building of a new custom home in Orlando or the surrounding Central Florida area, give us a call for more information on how to get started, as well as to learn more about what to expect during the home building process.