Ways to Finance a New Custom Build Home
So, you’ve decided to take the plunge and build your dream home. Congratulations! Now comes the fun part—figuring out how to pay for it. Don’t worry, though; financing your custom build doesn’t have to be a nightmare. Here are some savvy ways to get those funds without losing your sanity.
Construction Loans: The Big Kahuna
The most common way to finance a custom build is through a construction loan. This isn’t your average mortgage. A construction loan is typically a short-term, high-interest loan that covers the cost of building your home. You get the funds in stages as your home is being built. Once the construction is complete, the loan is either converted into a traditional mortgage or paid off with a new loan. Think of it as the financial equivalent of a caterpillar turning into a butterfly.
Home Equity Loan: Tapping Into Your Castle
If you already own a home and have built up some equity, a home equity loan can be a great way to finance your new build. It’s like giving your current home a purpose while it waits for you to move into the new one. Home equity loans typically have lower interest rates than other types of loans, which is a nice bonus. Just remember, you’re putting your current home on the line, so make sure you can handle the payments.
Personal Loans: The Quick Fix
Personal loans are another option, especially if you need to cover smaller costs that pop up during the building process. They’re easy to get and don’t require any collateral, but the interest rates can be higher. Use them sparingly—like a Band-Aid for those unexpected expenses, not a cure-all for your entire budget.
Savings: The Old-Fashioned Way
Yes, this might sound like advice from your grandma, but saving up for your custom home is a tried-and-true method. If you can afford to save a significant amount, you’ll have more leverage when it comes to loan terms and interest rates. Plus, you’ll feel pretty awesome knowing you’ve got a solid financial foundation under your new home.
FHA Loans: Government to the Rescue
If you’re a first-time homebuyer or have a less-than-stellar credit score, FHA loans might be your best bet. These loans are backed by the Federal Housing Administration and require lower down payments and credit scores than conventional loans. Just keep in mind that there are limits on how much you can borrow, so they might not cover all your costs.
VA Loans: For Our Veterans
If you’ve served in the military, a VA loan could be an excellent option. These loans are backed by the Department of Veterans Affairs and come with great benefits like no down payment and no private mortgage insurance. It’s a fantastic way to thank our veterans for their service while helping them build their dream homes.
Friends and Family: The Bank of Mom and Dad
Sometimes, the best place to look for financing is close to home. Borrowing from friends or family can be a win-win situation if everyone’s on the same page. Just make sure to treat it like a business transaction—put everything in writing to avoid any awkward Thanksgiving dinners in the future.
The Bottom Line
Financing a new custom build home can be a complex journey, but with the right approach and guidance, it can be a smooth and rewarding process. By exploring various financing options and working with the right professionals, you can secure the funds needed to bring your dream home to life.
BuildCo7 can help. Reaching out to us is the first step of many toward building the home of your dreams. If you can take this first step, you’ll have a trusted contractor to walk through the rest of them with you. Call us at 615.891.2398 or fill out our contact form to get connected with our team today.