Building Your Dream Home
Have you ever thought about building your dream house?
There are two ways to go about the process.
The first is pretty straightforward. You can buy into a development where a builder (or a handful of builders) is putting up multiple houses in various styles and you can customize your home from one of the styles.
Buying with a Builder
The builder can help you set financing – or if you don’t like the terms they are offering, you can go to your own financial institution and set up financing - for the house and the process is fairly similar to buying an existing home. The extra steps are working out the specific plans and features for your build before you finance.
Use our mortgage payment calculator or talk to one of our home loan specialists to see what you can afford. You can even get pre-qualified so you’re ready to go when you decide what and where you want to build.
Financing Your Dream Home Alone
The second option is slightly more complicated. You can buy a piece of land and then hire a home builder to build exactly what you want.
If you go this route, you also have to add in costs that usually don’t come with a traditional purchase. An architect will cost about 5-15% of the cost of your house to design and build it. There are also a number of other professionals that will need to be included in the process beyond the builder. Count on it taking at least a year to get from idea to house.
And financing a new custom home is also slightly different. Since you are financing something that doesn’t exist yet, a strong relationship with a lender is crucial. They also will expect 20% down on whatever you plan to build. Custom builds mean each project is unique, so your best bet is to talk to a home loan specialist who can walk you through the process.
There are a couple of different ways to finance the build.
You get a two-part loan from the lender (money for construction and for the mortgage) and you’re put on a 12-month ‘draw’. The bank lends you money for construction over that time and you service only the interest on the debt. Usually the money is drawn from the bank at milestones during the construction. When the build is over, the balance is then rolled over into a mortgage.
The second way is called a construction to permanent loan. Here the whole project is wrapped into a 30-year mortgage from the outset. Although many times lenders will only finance 80% or less of the project costs.
Either way, your best bet is to sit down with a home loan specialist to see which path is better for you before you get too far into the process.
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