Blakley Huntley, BB&T
Mortgage Loan Officer l Chapel Hill, Elliot Road
Juliana Wilson, Thomas & Associates
Green Real Estate Appraiser | Durham & Chapel Hill, NC
Just like with custom homes, its all about the options! Custom homes are just that: homes that are planned or customized from plans to make your dreams a reality. Customizing your construction financing is a key component on the construction lending process. Just like there are permanent financing options, there are many construction options that allow great flexibility both for the construction and permanent financing of your home. There are typically two ways to handle construction financing for a new home; a construction loan, which allows for construction only of the home, and a construction/permanent financing which allows you to save money and time in the mortgage process. With a construction/perm loan, you know that you have financing in place, whether or not changes occur in your financial situation. And, with a one closing option, homeowners will save money because there is only one set of closing costs. If your lender treats a construction/permanent mortgage like any other mortgage, there are all kinds of options such as stated income, no ratio, interest only and a whole range of options available for permanent financing. Often, the excitement of planning your custom home can be tempered by the worry of actually getting it financed and built correctly. With regard to financing options, it is very important that you obtain the right lender and loan to make your loan process go smoothly, just as you have chosen the right builder. Ask your lender about their success with construction and construction/permanent financing and what sort of experience your particular loan officer has had with this type of lending. Choosing an experienced lender can make the difference in an exciting building process and a frustrating one. When building a new home, its not uncommon for a homeowner to make modifications or upgrades to the original plan. If this occurs during the construction of your new home, typically you must pay any cost increases to the builder at the time that the change order occurs. Establishing a higher loan amount during the construction phase is another way to customize your loan. Always keep in mind that the loan amount that you requested can be reduced prior to the construction loan conversion. One option to consider is whether or not you plan to sell your home before construction begins. Living in your existing home until the time that your new house is complete gives you more flexibility in when your house sells, and allows you to move only once. Some lenders allow you to start construction without counting your existing home mortgage payment as a debt; others want that house sold before construction begins. At BB&T, we allow to you to market your home while your new home is under construction. This gives the average borrower more flexibility with regard to down payment. Some clients may have funds for down payment coming from the sale of their existing home and therefore may have as little as 5% to put down on the lot and house during construction. Generally, loans with five per cent down require private mortgage insurance. Even with 5% down, some lenders do not charge private mortgage insurance during the construction period. This allows you greater flexibility in that as long as the amount of the loan compared to the value of the house is less than 80% by the time you roll to your permanent mortgage, there is no private mortgage insurance. Perhaps you wish to buy your lot and wait for a year or more to build your home. Once you are ready to build, the current value of the lot is used for cost purposes, which means that you will realize any appreciation in value for the lot that occurs. This could mean that you have to put less down to obtain that 80% loan-to-value that allows you to avoid private mortgage insurance. Another great way to have more options when it comes to sources of down payment. Construction periods are usually allowed up to twelve months, with permanent financing up to 30 years. Two of the best programs are a one year adjustable rate mortgage that allows you to go to a fixed rate or another adjustable at the end of construction or a five year adjustable rate mortgage. With both of these options, we are able to lock in an interest rate so that you are protected if rates rise, but able to take advantage of a drop in interest rates should they fall. Another great way to customize your situation! Whether you are building your dream home or still dreaming, Blakely Huntley at BB&T Mortgage can help you to understand the benefits of a BB&T Construction/Permanent loan. We can help to make the process of financing and building your new house easier by putting years of experience to work for you.