Build with Less Cash Than You Think
Building a custom home doesn’t require you to have 100’s of thousands of dollars to start construction. You can build the custom home you want; creditworthiness is the gateway, not your cash on hand.
Start with getting pre-approved to see what you qualify for.
The loan officers at Harbor Financial Mortgage specialize in loans for the custom home build process and have worked with the highest rated builders in exclusive communities around the Greater San Antonio region on hundreds of custom homes.
The Financing Process in a Nutshell
Pre-Approval
Finding out what level of custom home build you can afford.
Land Financing
Financing your land instead of paying cash allows you to cover contigencies during the build process or put money down on your permanent loan after construction process. If you already own your land outright, then that’s one less item to impact your permanent loan amount.
Construction Loan
This loan is what will fund the land development and home construction taken in draws for each phase of the construction.
Permanent Loan
After the construction is completed, this is where you get your permanent loan to payoff the land and construction loans.
What is a Construction Loan
A construction loan is short-term financing used to pay for building a home or other structure from the ground up (or for a major renovation), rather than buying an already-built property. Here’s how it generally works.
Construction loans disburses money in stages, called draws, as the project hits certain milestones — foundation poured, framing done, roof on, and so forth. The lender or a third-party inspector typically checks on progress before releasing each draw, which protects the lender against paying for work that hasn’t actually happened.
During construction, borrowers usually pay interest only, and only on the amount that’s actually been drawn so far rather than the full approved loan amount. This means that you’re not paying the full loan amount at the beginning, just what’s being used.
Terms tend to run around 12 months, but can be extended depending on your lender and situation. Ask your lender about extensions before hand as construction projects can get delayed by weather, inspections, site conditions, material availability, etc.