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.
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