It’s one thing to decide you’re ready to purchase a new home—paying for that new home is an entirely different animal. And if you’re building a house instead of purchasing an existing home, there’s a whole world of options available to you. If you’re already feeling a little overwhelmed, take a deep breath! At Wausau Homes, we live and breathe new-home financing and we are here to help!
Keep reading to learn more!
Custom-Home Financing Options
In most cases, a single-closing loan—also referred to as a “construction-to-permanent” loan—is the easiest, most straightforward option for financing your new home. This type of loan covers the funds needed to secure the property and build the house.
Once your home is finished, the loan converts to a traditional mortgage, and you’ll pay the remaining balance of the loan over time. A time-saving benefit to a single-closing loan is that you will only close on the loan once.
Mortgages under a single-closing loan are most often conventional loan, FHA loans, or VA loans. A conventional mortgage requires a minimum down payment of 5 percent and a relatively high credit score. FHA and VA loans require a smaller down payment (VA loans don’t require a down payment at all, in fact) and are a better option if you’re still building your credit.
Also known as a “construction-only” loan, a double-closing loan involves two steps. First, you’ll use the loan to purchase the lot and build your custom dream home. Once your house is built (or before, ideally), you will need to contact a mortgage broker for a traditional home loan.
You will attend two separate closings with a double-closing loan (and therefore will need to provide financial institutions with your financial records more than one time), but the advantage to this setup is that you are free to shop around for a home mortgage that fits your financial situation and your needs.
How to Make New Home Construction Financing Work For You
The key to making the new-home financing process as painless as possible is to engage the services of an expert. Mortgage brokers are great and full of helpful information, but when you’re building a new house, you need a team of people who have been through this process many times and know the new construction financing world inside-out.
When you work with an established custom home builder like Wausau Homes, you get the benefit of a team of new construction financing experts. Before your first meeting with the Wausau Homes Finance Team, give some thought to the following points:
- Your ideal monthly mortgage payment
- Your home budget
- The amount of your down payment
- Your credit score and current financial situation
When you know your comfort zone in terms of how much you can afford (and how much you’re actually comfortable affording, which might be two different numbers), you’ll be in a better position to have a productive conversation with your home finance expert.
Remember that there are plenty of ways to make your new home fit into your financial life—keep an open mind, and be honest about your financial comfort zones. Loan approval and the underwriting process goes much faster than you might think. Before you know it, you’ll be well on your way to the custom home of your dreams!