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Home Building Financing

Many different options are at your fingertips when mulling over financing for building a home. For some people, a simple bank loan/mortgage will allow them to build the house and live in it. Simple, right? In reality, this route may cause more headaches than you think. Unless you are a professional homebuilder and the people who will help build your future dream home (i.e. your family and friends) are pros too, you’re going to need a hand.

For most, hiring a General Contractor is the obvious route. Having the service of a seasoned professional is as reassuring as it is necessary. But this is not your only option. There are a lot of packaged home-building systems financing available from many companies.

Choose An Owner-Builder Program
What makes these programs great is that you don't need a large down payment or a stellar credit history to be approved. Plus, since you assume the role of project manager and do some of the work yourself, you're able to save money in the process.

The great thing about owner-builder programs is that you get complete support throughout the entire process. Because these groups are strictly concerned with people building their own homes, an owner-builder program can act not only as your banker, but also as a contractor. They can provide you with building advice during construction and set you up on a mortgage program when you're done.

Finances
If you've ever tried to get a loan to buy land, you know how difficult it can be. Some financial institutions may even ask you to provide a down payment that's equivalent to half of your loan. Let's face it, if you had that kind of money, you wouldn't be asking for a loan in the first place.

This is why borrowing money from a owner builder progam can make so much sense. Once you have been approved, an owner-builder program will let you borrow money without having to put anything down first.

Making Cents of it All
So, just what will an owner-builder program give you money for? Well, pretty much everything related to your build. If you qualify for one of these programs, you can often get up to 100% financing on:

  • Land
  • Materials
  • The cost of labor to build your new home
  • Closing costs, permits & fees

But what does 100% financing really mean? It means you could build a $300,000 home without having to make a down payment first. If you borrowed money from another financial institution, you would be requried to make anywhere from a 5% to 20% downpayment on the full price. For that same $300,000 home, putting 20% down would require that you pay out $60,000 before you had even started building anything!

Getting a Mortgage
After months of hard work, the house of your dreams is finally done. Since you decided not to hire a general contractor and instead acted as the project manager yourself, you've managed to save several thousand dollars. This means you now have the equity to make a down payment and get permanent financing for your home.

If you've been happy with your owner-builder program, then consider taking a mortagage out with them. Since they will want to keep your business, they will likely have very attractive interest rates.

However, just because you recieved the financing for the construction of your home from an owner-builder program does not mean that you are obligated to take out a mortgage with the company as well. If you prefer, you can always decide to go with another financial institution when it comes time to set up your mortgage.

Visit our forum for more advice on building your own home