9/20/2022 | By Team United
If you’re ready to move but just can’t find the perfect home in your area, chances are you’ve started dreaming of building your home. But, it’s not always as cut and dry as it appears on TV. From finding the land to choosing the floorplan, furnishings, design, and everything in between, building can seem like an exciting yet intimidating process. If you’ve often caught yourself dreaming of building, here are some tips to keep in mind before you get started.
Keeping your budget on track during a lengthy home build is one of the biggest challenges.
Even when you’re meticulous about your accounting, unexpected expenses often pop up. Setting aside a contingency fund of at least 10 percent of your overall budget is a good way to mitigate the financial strain of those inevitable surprises.
Remove “may as well” from your vocabulary during this time. It can be really temping to upgrade for another $100 here and there, but those upgrades will add up quickly.
While it’s a challenge to stick to your budget, if you lay the budgeting groundwork ahead of time and stay committed through each phase of construction, it’s doable.
It can be common for the construction to kick off before many decisions about design or interior have been made. However, without a clear plan and blueprints, you could find yourself making adjustments late in the game and costing yourself more money.
Think about how you will live in the space. Don’t get too far in without thinking about how the cabinets and furniture will fit. Wishing a wall was in a different place after it’s too late could be either disappointing or expensive.
This is one of the most important decisions you will make. You will be working so closely with your builder throughout the process and your overall experience is largely determined by your relationship with them.
Do your homework before you make your decision. Interview and meet with lots of builders and ask for referrals. It’s also a good idea to ask for names and numbers of the last three people they worked with to get a real-life view of how people felt about their experience with that builder.
There are several types of loans to choose from, but don’t let the different loan options overwhelm you. You don’t have to make this decision alone. It’s always best to contact your local Mortgage Advisor first to talk through your budget and the best options for your unique situation.
To get you familiar with your options, here are some of the different types of loans you’ll encounter.
If you’ve found the perfect land but don’t plan on building for several years, a Lot Loan could be best for you. At United, we offer a variety of terms and when you’re ready to build your dream home, we have the construction financing to make it a reality.
A construction-to-permanent loan lets you borrow money to build a home. When you finish building, it converts to your permanent mortgage. The benefit is that you only have to pay closing costs once.
You receive funds to complete the property. After paying any closing costs and fees, you reapply for a new loan to pay off the loan. This arrangement is ideal for expensive homes, though, the two separate transactions make construction-only loans pricier than their counterparts.
Renovation loans are for “fixer-uppers.” Unfished basement? No problem! These loans are the right loan for you when you’ve found that home that is in the right location, but not quite the layout or state you’d like it to be in. They come in several flavors, such as cash-out refinance and home equity line of credit (HELOC). You can combine the construction and renovation costs into the final mortgage. You also do not need to present your lender with an exhaustive plan or budget.
Owner-builder construction loans let the borrower act as the home builder. These are uncommon because most people are not qualified home builders. Your best chance of getting one is to be a licensed builder or contractor.
End loans are synonymous with mortgages. It is a long-term loan that pays off short-term construction. Some end loans have interest-only features, which delay the repayment of the principal. This is the option for you if your builder sells you the newly constructed home at the end of the build process.
With planning, research, and expert guidance from your Mortgage Advisor, you can build your dream home. Ready to get started? Reach out to a Mortgage Advisor near you, schedule an appointment at a location near you, or apply online!