Building Your First Home? 4 Strategies To Handle Tricky Financing

When you build your first home, one of the things that you have to make sure that you have in order is the financing. 

If your credit score is good and you can show the income to pay the loan or mortgage off, then it's usually fairly easy to secure the financing that you need. 

It's best to make a budget of the size of the home and the work that you want and need done before applying so that you have an idea as to how much you will need to borrow.

Type Of Closing

There are basically two ways that most finance institutions will handle the closing on a new home. Most will go through a one-time closing. 

This means that the interest only loan will be approved for about six to 12 months while the home is in the process of being built. Once the home is built, it is converted to a fixed rate for 29 years. 

It's best to pay off the loan as soon as possible so that you don't wait this long. The second is a loan with two closings. There is an interest only construction loan for the building of the home and a second closing that will be refinanced once the home is built.

Qualifications

This is where you need to have the good credit scores and the income that is required to secure a loan. Most companies will look harder at a construction loan than a typical loan for purchasing a home because the collateral is not in place yet. 

Most down payments are about 20 percent. Appraisals and inspections are required before the loan is secured. 

Real Estate Agents

Sometimes, a real estate agent can help you get a lower interest rate and get through the loan process a bit faster. 

You need to get the agent to submit pictures and paperwork about the property and the intentions of the home that is to be built. This will often show that you are dedicated to the process of finishing the home and that you aren't going to back out.

Save Money

Before you secure a loan, save as much money as possible. Try to start saving about a year in advance. 

If you have a good amount of money available, you can use it to pay off a good chunk of the loan soon after its secured instead of struggling to get it paid back once the home is built.

Building your new home is an adventure. If you aren’t sure the best way to go about financing, consider working with a professional like those at Assurance Financial Group. 

You get to decide what it looks like and what it has inside. Once you jump over the financial hurdles, it's usually smooth sailing during the construction and design process.