In this guide, we will cover buying a new construction home. Many homebuyers prefer buying new construction homes. As the construction industry continues to flourish, more and more individuals are seeking to venture into the world of new construction. Ronda Butts, a dually licensed realtor and loan officer at Gustan Cho Associates, advises the following:
Navigating the world of financing for new construction can be complex for the uninitiated. With many financing options available, knowing where to start cannot be easy. Fortunately, financing a new construction project can be smooth and successful with the right guidance and knowledge.
In this blog post, we’ll delve into the world of financing for new construction and provide you with the information you need to make informed decisions. We will discuss the financing options for new construction and provide tips for navigating the financing world. So, whether you’re a seasoned construction professional or a first-time builder, read on to learn more about navigating the world of financing for new construction.
Types of Financing for a New Construction Home
Several financing options are available for new construction, including construction, bridge, and permanent loans. Construction loans are short-term loans that cover the construction cost, while bridge loans bridge the gap between construction and permanent loans. Ronda Butts, a dually licensed loan officer, and real estate agent, is a new construction home lending expert. Ronda says the following:
We have a very popular all in one new construction home financing program. You can purchase the land, have the cost of the construction, and when the project is finished, it converts to an end loan. Borrowers need a 700 credit score to qualify.
Permanent loans are long-term loans used to pay off the construction loan and cover the cost of the completed project. Conventional and FHA loans are used for most residential loans, and Non-QM loan products are for those that do not fit your normal financing guidelines.
Choosing the Right Financing Option For a new construction home
Choosing the right financing option for your new construction project depends on your financial situation and the specific needs of your project. Ronda Butts of Gustan Cho Associates advises about choosing the right financing options for your new construction home:
Searching for the right loan options can be time-consuming, particularly if you are unfamiliar with the lending industry. Working with a broker can save you time, as they will do the research for you and present you with the best loan options.
Considering each financing option’s interest rates, fees, and terms is essential before deciding. It’s also important to work with a reputable lender who understands the unique challenges of new construction financing.
Advantages of Financing with a Mortgage Broker
Working with a broker can provide several advantages when financing new construction projects. Brokers act as intermediaries between you and the lender, helping you navigate the complex financing world and finding the best loan options for your needs. Here are some key benefits of working with a broker:
Mortgage Brokers work with various lenders, including banks, credit unions, and alternative lenders. This enables them to provide access to a wider range of loan options than you might be able to find on your own.
Mortgage Brokers have extensive knowledge of the lending industry and can provide expert advice on the best loan options for your project. They can also help you understand the terms and conditions of each loan option, ensuring you make an informed decision.
Mortgage Brokers are skilled negotiators and can help you secure the best terms and rates for your loan. They can also negotiate on your behalf if any issues arise during the loan process. Many brokers work on commission, meaning they are only paid if you secure a loan. This can be a cost-effective option, particularly if you are on a tight budget.
Should I Use the Builder’s Lender or an Outside Lender?
Choosing a lender is one of the most important decisions when financing a new construction project. The two main options are using the builder’s preferred lender or finding an outside lender. Both have pros and cons, so weighing your options carefully and making the best decision for your specific needs is important.
Using the builder’s preferred lender may seem the easiest option since they are familiar with the project and may offer incentives or discounts. However, it’s important to remember that the builder’s lender is not necessarily the best choice for you. They may not offer the lowest interest rates or flexible loan terms. Plus, their primary loyalty is to the builder, not the borrower.
Finding an outside lender can be more time-consuming, but it may also offer more benefits in the long run. Shopping around for different lenders can help you find the best rates and terms, plus you’ll have more options. Additionally, an outside lender, or a broker, can offer more impartial advice and may be more willing to negotiate with you on terms and conditions.
Navigating the Application Process
The application process for new construction financing can be lengthy and complex. Having all the necessary documentation and information readily available is important to streamline the process. This includes your credit score, financial statements, construction plans, and cost estimates. Working with a knowledgeable and experienced lender can help simplify the application process and ensure you have all the necessary documentation.
Managing Cash Flow
Managing cash flow is crucial when financing new construction projects. Having a detailed budget and monitoring expenses carefully is important to avoid cost overruns. It’s also essential to have a contingency plan in place in case unexpected expenses arise. Working with a financial advisor can help you manage cash flow and stay on track throughout construction.
new construction home versus already built home
Financing a new construction project requires careful planning and consideration. You can ensure the success of your new construction project by understanding the various financing options, choosing the right financing option, navigating the application process, and managing cash flow.
Working with a reputable lender and financial advisor can help simplify the process and ensure you have the support you need at every step. Before you begin the new construction process, during the process, and at closing, we have vast experience working with many new construction financing buyers.
We can take you through the entire process of acquiring financing for your next purchase. We also can connect you to title companies/attorneys and top real estate agents in your area that can help as needed. Call or text Ronda Butts at 407-460-7999 or email at ronda@gustancho.com for more information and further assistance on financing questions, comparing rates, and different loan options. Ronda is an experienced, dually licensed real estate agent and mortgage originator. She has successfully guided many homeowners through new construction purchases, building, and financing. She does not represent buyers or sellers but offers a free consultation at Gustan Cho Associates by connecting homeowners, buyers, and sellers to the needed sources.
