HOW TO BUILD A HOME WITHOUT A CONSTRUCTION LOAN
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2 loans?!?!?! 2 appraisals ?!?! 2 sets of closing cost?!?!?
Is that keeping you from moving ahead building your dream home?
The “typical” custom home build requires 2 loans.The first loan is called the “Construction Loan” and the second loan is called the “Permanent Loan”.
The Construction Loan
Construction loans are typically obtained through a conventional lender (A bank). Construction loans typically require between 20%-25% cash or equity from the borrower. The equity (Difference between the lot value and the lot loan.) in your lot is allowed to count toward the required equity. Construction loans are typically 1 year in length and typically cost 1%-3% more than the “Permanent Loan”. Borrowers typically pay interest only during the construction process. Construction Loan lenders usually require the borrower to have a written commitment from the Permanent Loan lender so that at completion they are assured you can get the funds to pay off the construction loan.
The Permanent Loan
This loan is the same type of loan that you would get on any home. These loans are typically 15-30 year loans amortized so that the loan is paid off at the end of the term. Down payment requirements vary from 100% USDA loan to 20% down conventional loan. In between there are products like the 3-5% down FHA loan and many other products.
So how does CMS Homes make this process easier for you?
We offer a 1 loan process to our custom home customers. If the customer and the property meet certain criteria we will obtain the construction loan for you so that you only have to go through one loan process and close that loan when you receive the keys to your new home. To participate in our “Easy Build” program requires the following:
- 10% down or have 10% of the total purchase price in lot or land equity (Value of land minus loan balance).
- Deeding lot title to CMS Homes.
- Satisfactory pre-construction appraisal of lot and house.
Of course if you don’t want the “Easy Build” program we will do a standard build where you obtain the construction loan.
For more information on the “Easy Build” program contact us
Easy build program is contingent upon builder’s obtaining approval from builder’s lender for construction loan and may have additional requirements based upon lender’s requirements.