A home loan for a custom home can be very different from a traditional mortgage. As you’ll be approaching a lender to finance something that doesn’t exist yet, the conditions of the loan are going to be at a higher risk for your lender. The final value of your home won’t be calculated for months or even years through the time that your home is being built, so it can be tough to speculate on the total value of your home as well. As a result of the increased risk and the need for flexibility with the price of the loan, there are much tougher requirements for custom home loans. Here are some other things to consider when building a custom home!
Finding The Right Specialist
A traditional home loan can be made with nearly any type of specialist. But with a custom home loan, you will need to work with a bank that has experience.
You Will Have Tougher Requirements
Construction loans are harder to get and you often require at least 10% more for a down payment than you would for a traditional mortgage. The credit qualification and income level requirements are going to be higher so if you have a lower credit score it may be easier to buy a house rather than build one.
Higher Upfront Costs
You may need to spend for a drawing inspector, appraisers for your builder and more. It costs potentially twice as much for a custom home loan over a traditional loan.
When going to get any type of custom home loan make sure that you arrive organized with your county approvals, appraisals and an architect. You need to make sure that all permits are in place and that you can prove to the lender the total value of your home project.
Don’t Spend All Your Savings Before You Get Approved
It can be very tempting to spend out some of your savings to secure a site, to pay for designs and to get your project off the ground. You will need access to a reserve of money to prove your financial health so it’s important to keep access to some of that money throughout your project.
Keep some of these top ideas in mind regarding your custom home loan. If you could use assistance obtaining a custom home loan, contact us today!
This post was written by Eloy Molina, owner of Rodeo Construction! Rodeo Construction is a leader in the field of new construction. We not only offer exquisite, professionally designed homes, we offer them at affordable prices. We are the premier new home builders in Albuquerque and we deliver the best custom home service in New Mexico. Contact us today!