Before you jump headlong into any substantial building project, it is important that you and your builder agree to several key points upfront. Items such as budgeting, project scheduling, fees and the parameters around up-charges or upgrades should be clearly agreed upon prior to the start of your project. What you need is a Builder’s Contract.
If you are going to be financing your new home or renovation, this contract will likely be required by your lender. Even if it is not, it is an important document to help protect both parties’ financial interests and will help head off any common misunderstandings.
Make him your new best friend. A Builder's contract will make sure both of you are in agreement on all the details.
Continuing on in our series on financing your new home, I would like to share with you an additional step you can be working on while you await the result of your loan application. If you haven’t already, be sure to read blog posts 1-3 of the series on how to begin the construction loan process
Now that you have applied for your loan, you need to identify your builder and begin contract negotiations. Having a contract in place is a requirement of most construction loans. It is also an important way to protect yourselves and your future investment. What follows is an excerpt from an article on construction loans that I often refer to clients of Kelly Custom Homes.
So you’ve identified the best type of construction financing for your new home. Great! If not, be sure to read Part 2 before you continue.
One of the things you may find when you start calling around to local banks and institutions about a construction loan is that many institutions do not offer them. Do not be discouraged! Keep calling; make sure to ask for the construction loan officer or whoever handles those types of loans.
In this second part of the series, we move on to the Construction Loan.
A construction loan can help make your dream home a reality.
Unlike the typical home purchase of an existing house, there are not as many financing options available to the new home builder. In fact there are only three real options for those looking to build a new home.
Finance the home building process yourself. You can either using savings, home equity lines of credit, a generous uncle or a ponzi scheme (just kidding!). However, according to the US Census, only 1 in 5 new home builders go this route. For the rest of us with a last name not ending in “Gates”, there is the construction loan option.
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