Finding your dream home can be challenging. Maybe you’ve had your eye on a home that’s not up for sale, or maybe it just doesn’t exist yet. No matter the situation, if you have a clear vision for your primary residence, you can make it happen with a new construction loan.
How to Build Your Dream House
Building a new home can be intimidating, especially if it’s the first time you have gone through the process. Let’s look at some steps you can expect along the way.
Find Land
Perhaps you have already found the perfect plot of land, but if not, work with a real estate agent to find property that matches your specifications. Think about what’s important to you in a location, such as good schools, stellar views, or a walkable neighborhood. Whatever it is, this is your chance to define the site of your dream home.
If you already own land, the equity can be factored into the underwriting of your new construction loan. If not, the loan amount can actually incorporate some of the cost to purchase the land.
Design Your Dream Home
Work with an architect to craft a design that aligns with your vision, budget, and parcel. These costs are not included in a construction loan, so you’ll need to have cash on hand to cover design. If this isn’t an option or your budget is limited, look into stock plans that are appropriate for your site. Many builders offer plans that can be adapted to the specific site conditions.
Interview Builders
Find a local builder with experience relevant to the unique aspects of your project. If you don’t have anybody in mind, you can narrow the pool by asking friends for referrals, getting suggestions from your architect, or reading online reviews. Make sure the builders you are considering are licensed and insured, and request references to see what it’s like to work with them. When checking references, ask about the builder’s ability to stay on time and on budget, their communication style, and anything else that’s important to you.
Get Financing
Once you have identified the site and created design plans, it’s time to start talking to construction lenders. New construction loans account for the cost of the land, permits, labor, and materials. Be prepared to share the design drawings, a cost estimate from the builder, a timeline, and your personal financial information to start the approval process.
Payments are disbursed directly to the contractor at points throughout the project. If you’re also purchasing land, this will be the first payment released at loan closing. Once the project is completed, you can get a traditional mortgage to pay off the construction loan.
Why Consider a New Construction Loan?
Even if you have a lot of equity in your current home or other real estate assets, that doesn’t necessarily mean you want to use the liquidity of these assets. You never know when you might need that equity for something else, so avoid tying it up by getting a new construction loan instead.
Construction loans also come with the benefit of interest-only payments while the project is ongoing. Often, the expected interest expense can also be included in the construction loan.
Why Consider a Private Lender?
Conventional banks have limits to how flexible they can be, especially with construction loans because they come with higher risk. A private lender can be more flexible with terms and borrower requirements, so even if you have less-than-perfect credit or a non-traditional income stream, you may be able to get a construction loan. Private lenders are also typically able to move more quickly, which can be critical if you are making offers on land.
Get a Construction Loan with Herzer Financial
Whether the vision of your dream home has changed since you bought your current house or you have never been able to find exactly what you want, building from the ground up is an option many people don’t consider. With Herzer Financial, you can get a tailored construction loan that allows you to finance the costs of building a new home. Our team will work closely with you to determine what’s possible so you can bring your vision to life.
Ready to build your dream home? Apply for a new construction loan with Herzer Financial today.