How Much Does It Cost to Build a Custom Home and How to Finance ItThe process of building a custom home tends to be more involved than that of buying a resale home. If you’re ready to go the extra mile, find out more about how much it can cost to build a custom home and how to finance the project.
Get Your Financial Records in Order BeforehandBefore you begin the process of looking for financing, you need to make sure that you have all your documentation in order. You’ll need the latest copy of your credit score, hopefully from all three credit report firms, including Equifax, Experian, and Trans Union. If you see any errors, you’ll need to fix them before you get started. Just like you would apply for a mortgage, you’ll also need documentation to verify your income, employment history, bank accounts, and tax filing history.
Finding Out How Much You Can AffordAs glamorous as you might want your dream home to be, you need to be able to afford whatever blueprint you come up with. Talk to some builders to get an estimate of how much it will cost to build the custom home, including extra room for accidents and unexpected setbacks. Compare the total with your income, regular living expenses and other financial obligations. As a general rule of thumb, you can afford to build a new home that’s up to two to two and a half times your average yearly income.
Whatever lending institution you choose will use your average income along with your credit score and debt obligations to make sure that you can get approved for the loan. So, you can save yourself some time by getting a sense of how much you can afford beforehand.
What Kinds of Financing Options Are Available?When building a custom home, you have a lot of financing options at your disposal. You can shop around for the lowest interest rate from some lending institutions in your area as if you were financing a normal resale home.
Builder FinancingYou can also take advantage of what’s known as builder financing. Some large or medium-size construction companies will have mortgage subsidies incorporated into their business. You can use these services to get a financing plan that’s designed around the home building process. Some options will include incentives for upgrading certain features of your new home.
Bridge FinancingYou can also apply for bridge financing, which is a form of financing that’s designed to help you get through the transition period. This usually takes place before you’ve sold your current house and before your new house has been finished. Bridge loans usually only last for six to nine months, so construction can get underway on your new home before you’re ready to move.
Coming up with a plan and the total cost of your custom home will help you get a better idea of what kinds of financing options you’ll need. Individuals looking to build a custom home can contact the professionals at CRC Builders for more information.