How to Finance a New Construction Home?

Don’t let financing stand in your way of designing your new custom build. Many times, at Michael Lee Inc, our clients haven’t purchased a new construction home in 20 year or this could be the first new construction home so they don’t have a basis for what’s in store to purchase their new home.  I want to shed some light on the options that we have for financing so that when Michael Lee Inc helps you with your new build, you have a basic understanding of how to proceed.

First off, before you even sit down with the builder, it is most important to talk to our recommended lender to get an idea on the best way to proceed.  Michael Lee Inc, encourages you to reach out to Adam Will with Tradition Mortgage to learn more about our financing process by email at adam.will@traditionllc.com or phone at 651-210-3789. Adam has been financing all of our builds for the last 3 years, being well versed in our process, makes this a smoother process for you. His insight can help rid many of the initial questions so we can focus on the home design once you meet with the builder, the fun stuff!

Each of our client’s situations are unique from first time home buyers to seasoned veterans, which makes our financing options unique in return as we simply do our best to work the best outcome for our clients.  Many times, our clients are cash heavy or their equity lies within their home, if that be the case, our clients can simply fund the build themselves or carry a home equity line to access the cash.  Adam can walk you through this process and how it plays out to make a smooth transition for you.  Less fees are involved if you are cash purchasing as most the fees come from the title company.

In the world of building, majority of our clients, need some type of financing.  At Michael Lee, Inc, we encourage our clients to obtain a construction loan. You may be curious as to why.  Simply put, we want you to be in control of your build and save on fees.  We have our clients purchase the lot up front and run the build through the title company whether it be cash or a financed build to ensure all subcontractors are paid in full at completion and all work is completed, as well.

For financing, Michael Lee Inc, recommends a construction-permanent mortgage, aka, a onetime close construction loan.  It is a three-stage mortgage that allows you to finance the construction of your new home, withdrawing funds to cover draws or expenses from the builder at on average about 3 times during the build process which typically takes on average about 4 to 5 months. When construction is finally completed, the loan coverts to a permanent mortgage.  The scheduled monthly payments of principle and interest will then take effect.

Michael Lee, Inc recommends this type of mortgage as it saves the consumer more money versus the original construction loan.  The original construction loan has a client pay closing costs up front when closing on the lot then a 2nd closing at the build completion which you pay a 2nd set of closing costs.  It makes more sense to proceed with the one-time close construction to save yourself money on fees.

Before you dive in and start building, let’s be certain you know your options.  Michael Lee Inc, works with all of our clients, so there is no set in stone financing process as we take everyone’s needs in account and proceed with what makes the most sense for our clients.

A constructionpermanent mortgage (CP loan) is a three stage mortgage that allows you to finance the construction of your new home. … When construction is complete, the loan converts to a permanent mortgage. At this point, scheduled monthly payments of principle and interest plus escrows, if applicable, will take affect.