Your home should be as unique as you are. It should fit your needs, your lifestyle and your tastes perfectly. And the only way to make sure a home is 100% you is to build it yourself. But building a custom home can be a confusing process. From choosing a piece of land to finding a builder to getting financing in place, there are a lot of hoops to jump through. At Alair Homes Sanibel, we’re here to help you through the process every step of the way.

One of the first things we recommend you do in this process is secure the appropriate financing to build your dream home, as this will help determine the exact budget for the new build. Financing and mortgage options are different for new construction versus existing housing, and it can be confusing.

We’ve compiled a list of the most frequently asked questions about new construction financing to help you understand your options. If you don’t see your question listed here, feel free to give us a call. We’re happy to help.

How do I finance the construction of my custom home?

If you aren’t able to pay for the construction of your new home in cash, you will need to apply for a construction loan. A construction loan will provide you with the working capital needed to build your home.

How does a construction loan work?

A construction loan is basically a line of credit given to you for the duration of the building phase of your project (anywhere from six to twelve months, on average). When your builder requires a payment or money to purchase supplies, they will submit a draw request to your lender to complete the required work. When the project is complete, the remaining balance can then be financed through a traditional mortgage.

How do I determine the amount to take out for my construction loan? What if I take out a loan that’s too big or too small?

Before taking out a loan, talk to your builder to determine a rough estimate for your project. But keep in mind that construction loans offer more flexibility than traditional mortgages, so the amount doesn’t need to be quite as exact. For example, if your custom build comes in under budget, you will only owe back the amount drawn during construction instead of the entire predetermined amount.

Am I required to provide a down payment for my construction loan?

Yes. Most construction loans require a down payment of at least 20%.

How do I finance my custom home after it’s complete?

Once the project is complete, you can roll the remaining balance over into a traditional mortgage.

Do I need to use the same lender for both the construction loan and the mortgage?

No. You are more than welcome to choose one lender for the construction loan and a completely different lender for the permanent mortgage. It’s actually a good idea to shop around and find the best rates available for each portion of the financing of your custom home.

Where can I find a reputable company/broker to finance my custom home?

Let us help! At Alair Homes Sanibel, we have many reputable contacts on the finance side of things. Give us a call today, and we’ll point you in the right direction.