Financing
So
Where's The Money Coming From?
Although it should always be included in the budget process,
financing is the last item finalized in the budget process.
Until you know how much you are going to spend, you can't
really lock in your loan. You should, however, talk to lenders
at the very start of the process to help establish your budget
parameters.
Custom home financing is usually
obtained with the cooperation of the builder. You can
obtain a single loan to acquire
the land, build the home and provide permanent financing
once the home is complete. This is typically referred
to as a "land acquisition/construction/permanent
loan." Since this is a very specialized area of
financing, you should interview several lenders before
settling on the right one. Be sure they do this type
of loan on a regular basis. Your friendly local bank
probably can pay lip service to this type of loan arrangement,
but may not really be able to make the financing process
painless and seamless. Your builder can provide a list
of qualified lenders that specialize in this area.
Your choice (or lack there of)
of a builder may affect your loan - even without you
being aware of it. Lending
is a "risk versus profit" business. Banks that
are knowledgeable in the custom home building process
know that whether a project succeeds or fails is usually
up to the builder, not the homeowner. The builder eventually
is responsible for insuring that the budget, design schedule,
selections, etc all fit together in a seamless exercise.
Homeowners can't do this because they don't have the
knowledge or construction team to make it happen. If
you pick some inexperienced builder without a good long
track record, the bank may not feel inclined to give
you a great loan rate or perhaps no loan at all. Smart
custom home building lenders will ask right up front
who you intend to use as your builder. Some folks are
surprised when the bank tells them that their loan "doesn't
fit into their portfolio at this time." This is
a euphemism for "You picked a lousy builder and
we want no part of it."
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