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Some potential homeowners might shy away from building their own house because they’re uncertain how to achieve financing for such a project. Financing a new home construction has different requirements than buying an existing house, and it’s not always easy to understand the process. If you’re interested in hiring a custom homebuilder for new construction, use this information as a guide in securing financing for your dream house.

3 Ways to Secure Financing for New Home Construction

1. Apply for a Construction Loan

custom home builderConventional mortgages don’t apply to new home construction, so you should skip those applications in favor of a self-build or construction loan. These loans are for a shorter term, have higher variable rates, and are available through banks and private companies. Request a loan amount based on all of the expected costs of the project, including permit fees, contractor costs, and loan fees. You won’t have an opportunity to finance additional money if your project goes over budget, so be as careful as possible determining your costs. Your approval will depend on your income-to-debt ratio, credit score, and ability to repay the loan. You’ll also be required to submit a detailed building plan and have a down payment of at least 20%.

2. Buy a Lot of Land

Before you apply for a construction loan, it will help to own the lot of land where you intend to build. When applying for these loans, you’re essentially asking a lender to back a plan for an asset that doesn’t yet exist. Already owning a lot of land gives lenders something tangible to consider as collateral. Plus, paying for the land upfront removes it from your construction loan, lowering your necessary down payment and overall loan amount.

3.  Partner With a Custom Homebuilder

Lenders will require you to prove you’re working with a licensed custom homebuilder before they approve your loan. A qualified builder will also work closely with you to develop the plans you must submit along with your loan application. The right builder will have plenty of experience and knowledge of the laws, ordinances, and permits needed to complete your project. 

 

The custom homebuilders at R & J Custom Home Builders in Chillicothe, OH, specialize in new home construction. Their experienced team works closely with clients to design a custom home, establish a budget and building plan, and begin the building process. If you’re looking for a reliable custom homebuilder, call (740) 703-9242 or visit their website today.

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