How Do I Finance A Home I Want Built?

Real Estate Broker/Owner with Regal Realty of the Treasure Coast LLC

How Do I Finance A Home I Want Built?

Financing a home that is being built for you is dealt with in much the same way as when you purchase a resale home.  But the following should be noted:-

1.  If you are purchasing a home built by a developer in a developlement they will more than likely take a deposit and build the home for you  and upon completion,  you complete the sale as the end buyer. 

Doing it this way the builder puts up the funds to build the home.  If the home is in a development there may not be as much room to make changes to the plans of the home.  Builders will have X number of plans, and you choose from there.  However, if you want upgrades such as upgraded tiles or crown molding these can be financed in the purchase price of the home.


2.  If purchasing a home on your own lot and it is not a cookie cutter model then you have more choices in the size, shape and specifics of the home subject to building and zoning regulations.  Often these homes are financed with a construction to permanent loan.  

The purchaser finances the building of the home, with a construction loan where the payments are often interest only. At completion the construction loan converts to a permanent loan.  No additional finance qualifying is required.  The qualifying is done upfront at the beginning of the construction process, to qualify for the construction loan.

The buyer as a rule only pays interest on the construction loan based on the amount given to the builder.  A builder constructing a custom home is given draws, and before another draw if given the builder's work has to pass inspection with all building, zoning and government agencies. 

Custom built homes can take longer to build than homes that are within a development.


See More blogs oh home building:-

 How Long Does It Take To Build My Dream Home?

 Build A New House Just For You



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Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Many "construction to permanent" loans here require the buyer to close on the land purchase first. 

The risk is that, if the home isn't finished, the buyer is stuck with the land and a partially completed home.

This occurs more often than we would like.  Builders go out of business and the buyer owns the lot but no home.

This is why buying a floor plan from a builder who owns the lots and finances the purchase with a small earnest money is safer.

Apr 25, 2014 08:27 PM #2
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