Financing your Custom Home
How can I finance a custom home?
One of the key factors involved in financing your custom home is that lending institutions like the fact that you are working with a custom home builder with a long and successful track record of building and remodeling homes and commercial buildings. And they most certainly like the fact that the completed home or remodeled home is worth much more than the original mortgage amounts. Working with Blu Shields Construction will definitely improve your chances of obtaining financing at favorable rates and terms. And we can help you contact lenders that are most active in your geographic area.
Are there different requirements for first-time homeowners and someone who already has a home?
Every lender has different requirements. In general you want a lender that can offer:
- Easy and quick approval process
- Low and competitive fees
- Competitive interest rate
- Good customer service
Is there a minimum financial commitment I have to make?
Your financial commitment will depend on many factors. For example, do you own the lot you wish to build on? Is it owned free and clear? The size of the loan is also important, particularly for larger loans known as “jumbo loans.” You may also want to inquire about other loan terms and services such as:
- 100% construction financing (available in the past but almost impossible today)
- Construction-to-Permanent Loan (one loan and one closing, not two)
- One loan. One set of fees
- No payments during construction
Types of Loans for Custom Homes
At one time these were more common but today they are more difficult to find. The traditional approach was that the homeowner would obtain two separate loans, one for construction of the home and the other for the permanent financing. This approach requires two loans, two closings, and two sets of fees. A Construction-to-Permanent loan allows the borrower to build and permanently finance his/her home with a single loan. It combines both types of financing into a single loan – one loan, one closing, and one set of fees – obviously a better deal for the borrower.
A lot loan from a lender will allow the borrower to purchase a residential lot for future construction of a custom home.
Bridge loans allow the borrower to begin construction on his or her custom home BEFORE selling their current home. The borrower is accessing the equity in the current home to use as the down payment on a Construction or Construction-To-Permanent loan.
Remodeling loans are available for the homeowner who is making a major improvement to their home. These improvements usually include kitchen and/or bathroom remodeling but can be for a wide variety of improvements. They are very advantageous because the borrower receives the construction funds at loan closing.
So don’t worry – financing your Custom Home in a coastal area is probably easier than you think. Because of our years of experience building quality homes and commercial properties, Blu Shields Construction has developed unique relationships in the real estate and lending industries.