Financing Your Dream Home

Financing Your Dream Home

There are a number of ways to finance your custom-built home. Some people buy a suitable building lot and save their money before starting construction. Others want to proceed with financing of both the lot and the construction.

Purchasing the Building Lot

If you currently own a home, consider your home equity as a financial resource to purchase your property. Using your home equity can be a smart way to obtain funds because the rate is lower than other forms of financing and the interest you pay may be tax-deductible.

Some home equity options to consider are:

• Home equity loans and lines of credit

A home equity loan is distributed as a lump sum for one-time purchases, whereas a home equity line of credit establishes an account that you can draw from as needed for ongoing expenses up to the specified maximum. Both options offer lower interest rates than typical consumer credit, as well as potential tax advantages.

• Cash-out refinancing involves obtaining a new mortgage for an amount greater than your current mortgage balance and taking the difference in cash. The difference is deducted from your equity.

• Bridge loans can be a solution for those who want to obtain financing before they have sold, or closed on, their current home. Bridge loans typically allow up to six months to sell the current property, with interest due at the end of this period. The bridge loan can make sales contingencies unnecessary by permitting buyers to use the equity in their current home for a down payment and closing costs.

About the Financing Process

Before you begin an application, be aware that:

• You can finance a building lot in addition to obtaining a construction loan.

• We require that customers hire a qualified general contractor to supervise the construction of their new home.

Applying

We will assist you with completing a loan application. There are generally six areas of information on the application:

1. Personal data: Full names, addresses, and Social Security numbers of all borrowers.

2. Income: The amount and source(s) of income for all borrowers.

3. Assets: Information on all assets you’ll be using to qualify for the loan, such as checking and savings accounts, stocks and bonds, retirement plans, and other real estate owned.

4. Debt and obligations: Information on all outstanding debt and other financial obligations.

5. Credit references: Information concerning loans or debt that have been paid, plus any other references to good credit use.

6. Property information: Specifics on the property you wish to buy, if you’ve chosen one.

Obtaining Inspections

Once your loan is approved, we will contact you to discuss any approval conditions. As construction progresses, you will schedule required inspections and verify that the necessary permits are obtained. Construction must begin within 30 days of closing, cannot stop for longer than 30 days, and must be completed within the negotiated timeframe. As work progresses and is completed, inspections are conducted before the necessary funds are disbursed.

Closing

Prior to closing, we’ll ask you to provide certain insurance and real-estate-related documents. When you are ready to schedule your closing date, all involved parties will be contacted to arrange for the closing to take place at a convenient time and location. The closing procedure and associated fees vary depending on where you purchase. Prior to your close date, you will be notified of the amount you need in order to close, as well as any additional documents.

At your closing, ownership of the property is transferred to you. A closing agent (an attorney of your choice or a title agency representative, depending on what is customary in your area) coordinates and distributes all the paperwork and funds, according to the terms agreed upon by you and the seller.