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Advice on Financing the Building of Your New Home

residential house design

Building your new home can seem like an intimidating process if you’ve never done it before, especially when it comes to making sure the correct finances are in place to complete your project successfully. Here is some advice from a residential architect in NJ.

You Need a Construction Loan, Not a Mortgage 

A bank or lender won’t grant regular mortgage when you are building, because that is financing for something that already exists. Different rules for financing apply when you are planning to build, and lenders can be far stricter with their criteria for loans and offer different loan structures as a result.

Loans for building projects are known as construction loans, self-build loans or construction mortgages. These are typically short-term loans that come with a one-year maximum term, unlike regular mortgages which typically have much longer terms. This doesn’t mean you have to pay it off in just one year. Instead, the loan allows you to pay for what you need as you build, and then – once your home is complete – you can refinance the construction loan into a regular mortgage or get an end loan with similar terms to a long-term mortgage to pay off the construction loan.

Down Payments Can Be Higher

Down payments are generally required for mortgages, but they tend to be much higher for construction loans – around 20 to 25%. So, it’s worth keeping this in mind when you are deciding on the loan amount. This is because these loans are regarded as a higher risk. For example, when you buy a home with traditional financing, the lender can take the home and property if you default. If you take a construction loan, however, there may be an incomplete or lower-value home to take in the event of a default, leaving them unable to recoup their losses.

Try to Buy the Land Upfront 

If possible, try to purchase your land upfront rather than including it in your construction loan. Not only will that make your loan easier to get and repay, but it will also reduce the large down payment for the loan significantly. It also helps you negotiate your loan more successfully if you have an asset you can use as leverage to get your financing.

Work With a Qualified Construction Team and Residential Architect in NJ 

Once you have your construction loan, you want to make sure that you get the best possible value for money to make sure that your completed home is worth as much, if not considerably more than what it cost you. This means working with a qualified team of licensed, bonded, and skilled professionals. Take your time to look for a residential architect with a proven track record who is passionate about your project. A full-service architect can offer real value by managing every aspect of your build, from surveying your land and drawing up architectural plans for your dream house to handling permits, recommending professional contractors, and monitoring on-site progress.

Make the Best of Your Build – Hire a Full-Service Residential Architect in NJ 

The firm of Seth A. Leeb is a full-service residential and commercial architectural firm, and we have considerable experience working on large and small residential projects, including remodeling, extensions, and new builds. We consider designing and building your project as a privilege, and we’ll work with you to make the process as smooth and rewarding as possible. 

For more information on our services, which include custom home plans and home remodeling designs, and to speak to custom home architects, please contact us today or visit our website at https://leeb-architecture.com/