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Three Financial Steps to Building “On Your Lot” That Every Buyer Needs to Know.

There’s no denying that building a new home is a large financial investment. If you’re considering building On-Your-Lot with an existing, ready-made floorplan, it’s important to be aware of how the new construction financing process works.

While this article will give you some tips on navigating the financing of your land purchase, we always advise our clients to determine the home design you want to build at this early stage to make sure that your dream can be built on the land you are considering buying.  It would be unfortunate to purchase a piece of land thinking it was buildable only to find out it isn’t suitable for your new home.  That’s why we offer a free homesite visit for all clients.  From site analysis to construction and pricing, find out more about Site AnalysisEngineeringStages of Construction, and Transparent Pricing.

Here are the key financial steps to building a house that every buyer needs to know. Keep them in mind as you move forward, so that you can create a home that suits both your needs and your budget.

Step One: Choosing your lender & financing the land purchase.

As you start this journey you will need to find an experienced lender and loan officer, skilled in assisting clients looking to finance this type of home construction project.  At Timberlake Design/Build, we regularly work with several reputable mortgage lenders who can help you. Explore our Financing partners here

Step Two: Work with your Timberlake team to set a budget for your home building project.

Once you have a lot, and have selected your floorplan design, Timberlake’s next step is to develop a Preliminary Lot Finishing Estimate which outlines your sitework expenses for construction. Your salesperson will also work with you on your “must have” features to determine a home building budget. At the completion of this step in the process you will not only know the cost to purchase your selected lot/homesite, you will also know your home construction cost as well as the estimated lot finishing estimate so that a realistic loan budget can be established.  Our transparent process keeps you informed at every stage of the build and our careful planning results in the most accurate budget possible for our clients.

Step Three:  Apply for a “Construction-to-Permanent” loan.

After you’ve set a budget, it’s time to apply for construction financing with an experienced lender.

Mortgages are designed as long-term financing for the purchase of a home.  When embarking on a “On Your Lot” project you will need a short-term loan to finance the construction process and then, upon completion, a mortgage for the completed home.  This is where a Construction-to-Perm loan is the go-to product for financing.  

Designed to avoid the need for two separate loans when building your new home, a Construction-to-Perm loan finances the property/land purchase (if needed), the construction costs, and offers permanent closing in one streamlined transaction making it easier, and less expensive, for you to put your plans in motion.  At time of application, you can choose the type of financing you want (fixed or adjustable rate) and protect your interest rate by locking it in. 

During the construction process you will pay interest on the portion of the draws that are taken to finance your build.  When the home is completed so are the draws and the loan converts to a permanent mortgage loan based on the terms you’ve set.  Taking advantage of a “one time close” with one settlement up front enables you to enjoy the process of building your new “On Your Lot” home.

The bottom line.

At the end of the day, financing a new home isn’t all that complicated. It just takes a little planning and forethought. By putting the right team in place, specifically seasoned homebuilding and lending experts who will be able to guide you through this process, you can ensure that your project will be in good hands.

If you’re ready to learn more about financing your On Your Lot new home build, get in touch with us today!