Paying for Your New Home
A custom home follows a different financing path than a resale home or even a new-development house. Typically, you need a lender to give you a construction loan that automatically becomes a mortgage when the home is completed.
In the past, the money you borrowed was released in stages to pay those working on your home. When the building was complete and everyone including subcontractors and any others expecting a check had been paid, the lender and local building inspector inspected the house and then gave you a certificate of occupancy (known informally as a “c of o”). Then you could move into your home. You repaid the money you borrowed to have the house built by taking on a traditional mortgage.
Now the process is simpler. Many lenders offer what are called “combo” mortgages, where both construction financing and the permanent mortgage are rolled together into one loan package. In addition, the net value of the lot can often count toward the down payment.
Here are a few more points to consider:
Do not make your home so unique it will please only you. Every area of the country has tales of those homes — usually designed by their architect owners. They are startlingly unique and sit on the market waiting for a buyer, sometimes for years. Examples of such houses include a home built underground, a one-bedroom house, or anything else that strays very much from the usual realty offerings in your area. Generally, homes built in vacation areas — second homes — can be “one-of-a-kinders” more easily than those built in the more traditional year-round communities.
No matter how carefully you plan, your home is likely to take longer to build than you plan and cost more than you budget. That is a given.
It's smart to have a real-estate attorney when building a custom-designed home.
