It is needless to say that building your own house from scratch and buying a pre-constructed house are not the same. Building your own house gives you complete flexibility to customize every corner, and look over every detail, every element that goes into your home. Hence, a custom-built house is a dream for many.
Unfortunately, many with this dream have to halt their home-building journey before they can even begin; a custom home requires more expenses. The custom home financing involved in this process can get quite tricky.
But if you are determined to turn your dream home into reality, getting a mortgage loan to overcome the financial restraint can be a feasible option. A mortgage loan allows you to use the property itself as collateral for the loan and hence is the preferred loan type for most custom home building projects.
5 Mortgage Tips for Buying Custom-Built Homes
Build your wish list
This should be the first task on your list. No matter how long you may have dreamt of having the perfect house, maybe with a porch in front and blue window panes, designing your home, in reality, can be quite taxing. Right from the area search to the exact location where you would want your home, from the layout to the design of almost everything, from the tilt of the roof to the height of the door, the colors and textures of the walls, and the finishing of the handrails – the list about what is essential in building a house seems infinite.
Thus, it is extremely important to have a mindfully curated list of all the details you would like to incorporate into the building process. It will impact your overall budget, determining the loan amount and type you should opt for.
Have a detailed budget
With your wishlist at hand and thorough research over the internet, it is possible to have an approximate budget worked out for the building costs and overall cost. However, make sure to factor in your current monthly expenses because they are not going away as you are building your new home.
Despite the coverage from the loan, there always remain additional unforeseen costs that would require your attention. This means added caution for managing your finances for all the months when construction is on. A budget is also extremely important to know where your affordability is. It is important not to chew off more than you bite and then end up repaying a loan beyond your capabilities.
Know the scope of mortgage loans for your home building
Mortgage loans have a lot of intricacies that need to be well understood before you apply for one. Mortgages are available in different forms that come with different conditions and requirements. The most common type is the fixed-rate loan for 15 years or 30 years. However, the overall sum of the mortgage will depend on the type of property, the time, the interest rate, and the type of loan. You can get a detailed understanding of all the mortgage loans here.
Find the right lender
The importance of this step cannot be stressed enough. Find the right lender. Getting a mortgage is a big step and a long-term liability. Ensuring that you trust the right lender with your home-building dream is crucial and depends on it. Your lender is not only responsible for making the funds available for your loan but also for managing your periodical loan statements throughout the term.
Conduct a thorough background search of potential lenders, and don’t just rely on well-presented websites and self-acclaimed reputations. Make sure their contacts are reliable and have genuine feedback from past projects.
Be aware of the credit requirements
Your credit score is a major determinant of whether you will secure the ideal mortgage loan or not. It is best to review your credit status to ensure that it is strong before starting the application process. You would also need a downpayment of approximately 20% -25% of the entire cost, so make sure that is taken care of.
Bonus: find the perfect custom home builder
The role of a builder is also important in securing your loan. The profile of your home builder is the most important after your credit score when applying for a mortgage loan. The lender will also check your home builder’s credit and credentials, and any shortcomings there will reflect negatively on your mortgage application. With Villanueva Construction, you can rest assured about your builder’s credit score and reputation. We promise complete transparency that makes your mortgage processing smooth and ensures that your home building needs are taken care of at every point.
With this informative guide on mortgage and building and the expertise of Villanueva Construction by your side, you can now begin your journey to bringing the home of your dreams to life.