Beginning To Plan
So Many people have dreamed about building their own custom house. Having a bar inside their pool or a personal weight room. What many do not consider are basic questions that get them in trouble from the beginning? How much money do I need to put down to get a loan? What will the bank give me for a construction loan. Do I need some kind of land equity? Do I have good enough credit and meet the qualifications for a loan. Answer these questions before you proceed any further into the process. I have heard of many people not planning this part out and buying land. Yes they qualified for the land loan. But two years later their dreams are crushed because they don't qualify for the construction loan. Or they just did not save any money while sitting on the land, expecting the bank to front the whole cost of building. I am here to tell you this is not the way things work.
If you don't already own land then you will be paying two closing costs. One for the land and then another for the construction loan. This amount builds up quickly. Start off on the right foot and figure you finances out now. Not all banks offer construction loans because it is considered risky to the lender. You will need to have good credit and a down payment of 20 to 25 percent to qualify. Some banks will allow you to use the equity from your land, as a down deposit. Most likely they will still want you to have some cash reserve for any problems that arise through construction. The bank I used and highly recommend was WA FEDERAL. If you are in another state then research banks that offer construction loans in your area. Try to talk to at least three banks. Generate a list of question to ask each bank and weigh the pros and cons. Do your research here and make the right decision. Some questions to ask:
- How much can I get approved for?
- What is the construction loan interest rate and when complete mortgage interest rate?
- What are the fees for rolling over the construction loan to mortgage?
- What is the time frame to build a house in order to lock into these interest rates?
- Are additional appraisals needed?
- Do you offer construction insurance and how much.
- What happens if construction gets delayed past the time frame of loan?
- Are there any early pay off fees?
- What are the closing cost in total (land, construction, mortgage).
- What will be a close estimate of my monthly payment.
- How much do feel I should add for property taxes, mortgage insurance, etc.
- What are your options for me to receive the money while building my house. (auto deposit)
- How much time should I give the bank in order to get money while building?
- Is their a limit or fee on how many times I can withdraw money