22 Jun Custom Home Financing. What You Need to Know.
Custom Home Financing is different than getting a mortgage for an existing home. Unlike getting a conventional mortgage for an existing home, choosing to build a new luxury custom home means you will need to consider other financing options.
If you’ve decided that you want a home that fits your unique needs and are ready to look into building a new custom home, you will need to get ready for financing the project.
This post spells out the types of Custom Home Financing Options you will need to consider:
Types of Custom Home Financing
Construction-to-Permanent Loans for Custom Home Financing
A construction-to-permanent loan is a custom home financing option that allows you to fund the construction of your new home with a loan that will then convert to a permanent mortgage once the home is complete. Instead of obtaining separate lot and construction financing, a construction to permanent loan transitions to a permanent loan at the end of the construction of your new home.
During the construction, the loan dispenses money in “draws” at various stages of the construction process.
Construction-to-permanent loans are typically recommended if you:
- Are building a primary residence or vacation home
- Need to buy a lot and build and finance construction
- Want to prepay without penalty
Eligibility for construction-to-permanent- loans usually requires:
- Your new home must be a one-unit, single-family detached home
- The property must become your primary residence or a second home, such as a vacation home
- Your builder must be a licensed contractor
But what if you are not ready to build just yet and are only looking for the land to acquire for your dream home? That’s where you might want to consider a lot loan.
A lot loan from a lender will allow you to purchase a residential lot for future construction of your new custom home.
So, if you’re not ready just yet to break ground on your new custom dream home, but you have found the perfect location, a lot loan might be right for you.
What if you’ve found the perfect lot, and are raring to go, but you haven’t been able to sell you existing home? A solution may be a bridge loan.
Bridge loans allow you to begin construction on your new custom home before you sell your current home. Basically, a bridge loan is a short term loan taken out against your property to finance the purchase of your new property. Sometimes called a swing loan or gap financing, a bridge loan is typically good for a six month period, but can usually be extended to 12 months.
Devonshire Custom Homes Preferred Lenders
The above loan options are what you can expect to encounter as you plan your custom home financing for your new dream home.
At Devonshire Custom Homes, we do not offer builder financing, but our long and successful track record as a custom home builder can be an asset in your ability to obtain financing at favorable rates and terms.
Here is a list of our preferred lenders for custom home financing.
If you have more questions, we would be happy to help you with your considerations. Just click the handy button below and request a no strings consultation with our team. We are here to help.Free Consultation