Thinking About Building a Home in the Green Bay Area? Then You Need a New Construction Loan
Building a home is definitely not right for every buyer, but it does come with advantages that buying a pre-existing home does not have. Building a custom home is a path that many first time home buyers and seasoned home buyers choose as the right option for them. Many people don’t realize one unique factor of custom build new construction homes is that they also require a different type of mortgage that not every lender or bank offers. If you choose to custom build your home it will require a specific new construction home loan. This type of financing is short term and required to pay the builder during the construction phase of the home (what’s typically known as the draw period of the loan). Those in the lending field consider this type of construction loan specialty financing and the loan period is usually less than 12 months long. After construction on the home is completed and the buyers are ready to move in they apply for a more traditional mortgage product or the construction loan they had is converted to a more traditional mortgage product.
Lending and New Construction Loan Process
Another difference between a new construction home loan and a conventional mortgage is the way payments are made. For new construction loans typically the loan recipient makes interest only payments while the house is being built. In addition, these loans come at different interest rates than your standard mortgages. Most buyers take out a new construction loan that covers the cost of the land and all associated building costs such as construction supplies, labor, and permits, however buyers who already own the land are able to incorporate the current land loan into the new construction loan. The expert loan officers at Executive Mortgage can discuss the pros and cons of a new construction loan as well as the application requirements, down payment amount, and approval process with you and answer any questions you might have. New construction loans are disbursed at various phases of the construction process as opposed to one lump sum and may require inspections at each phase including a final appraisal at completion.
Spec Homes in Green Bay: Best of Both Worlds
One other option that is often a “best of both worlds” approach is purchasing a new construction spec home instead of custom building yourself. A spec home is a house that is built by a builder and sold when it is complete or nearly complete. This takes a lot of the headaches that custom building can cause out of the equation and you still get a brand new home. For most people this option is much less stressful and quicker. Often spec homes will also allow some amount of customization on the finishes or upgrades, but that will vary depending on the builder and the stage of the home. Given that the home is already built it does not require a specific new construction loan. A traditional mortgage can be used which makes the process just that much easier.
Want to discuss buying a home? Schedule a consult with Executive Mortgage today!