New BuildsMORTGAGES FOR NEW CONSTRUCTION
Your Dream Home Is Possible!
Suppose that in the process of looking for a home to buy, you can’t find something that meets your needs? Or maybe you don’t want the potential hassle of having to deal with the maintenance of an older house? A new-build may be your answer. Whether buying a new build or doing it yourself, it is possible to finance these two approaches.
To Buy Or DIY?
If you’re considering building a home yourself, then you’ll want to look at something called construction financing. As with a traditional mortgage, you still put a down payment on the property; however, the property’s final value includes the house you intend to build on it. For example, you may purchase bare land for $300,000 and want to put a house that costs $500,000 to build on that lot. The final value is $800,000 (which would require a minimum down payment of $40,000). The lender will want to see your plans and contracts for the house, so you need to prepare well before finalizing a purchase.
The funds are typically advanced in “draws” tied to the stages of construction, with periodic inspections to confirm that the work is proceeding as expected. The payments generally are ‘interest only’ on the amount already advanced, with a conversion to a standard mortgage term once construction is complete. However, every lender has its own policies, so your broker can help you figure out which direction to go.
Buying A New Build
Buying from a builder is also an attractive option. In this scenario, keep in mind that new homes are taxable, like any new purchase, and this tax amount is usually added to the property’s price and then included in the financing. Depending on when you buy a new home or how far in advance of completion you put in your offer, you will need to ensure you can arrange the financing.