4 Things to Think About With a Custom Construction Loan

Acquiring a loan doesn’t have to be complicated.  It is, however, one of the hundreds of things to consider when entering a custom home build.  Let’s explore 4 considerations with custom construction loans. 

DIFFERENT LENDERS

Not all lenders are the same. Lenders are a commodity you can research and shop around for to get the one that works best for your situation. Some lenders may combine the custom home construction loan and the home financing loan into one; transferring one over to the other. Others may provide you with a construction loan and have you apply for your home’s mortgage separately. 

DOWN PAYMENT/PAYMENTS

Depending on what lender you choose for your custom home construction loan, you may be required to pay a down payment.  Oftentimes, these payments are 20-25% of the estimated home’s value. Many lenders will only charge you interest during the construction phase. Once your custom home is completed, you will begin to make regular mortgage payments. 

MONEY IN STAGES

Keep in mind that construction loan money is dispersed in “draws” or stages of the construction project. Initial money will be dispersed for things such as the purchase of land, laying the foundation, and then money is dispersed periodically throughout the process. Often, a loan officer will inspect the custom home site to verify the process is advancing before additional finances are provided. 

WILL MY LOAN BE SOLD?

Unless your lender is a portfolio lender – one who does not sell their loan to a third party – you may be looking at refinancing or having to submit additional paperwork in the future. Often, lenders will sell their loans to what the industry calls secondary market lenders. This is an item to consider when choosing your custom home construction lender.

The loan process for building a custom home may look daunting, but with much research, a homeowner can choose the lender and type of loan for their unique preferences. The professionals at Shrock Premier will provide you with quality builders, reputable service, and an unbeatable timeline. Give them a call today!