A common misconception for homebuyers is that building a home is far more expensive than buying a house already on the market. Though it’s not for everyone, the reality is that building your dream house is not only possible, but can also be an affordable and rewarding experience.
Let’s break it down and see if building a home makes sense for you.
Factors to Consider
To help determine if home construction is the route you’d like to go, there are some critical factors to consider:
- Timeline - How quickly do you need to move? If you aren’t under a tight deadline, investing in building your dream home could be your best option, rather than settling for a home that isn’t the perfect fit.
- Location - The location and community you live in have a significant impact on your life. Make a list of the things you need or want from the area where you will reside - considering both short-term and long-term goals. If you decide to go down the building route, you will need to familiarize yourself with the local building codes and restrictions in the location you’re considering.
- Builder Options - It is essential to research not just the designs options but references, client testimonials, and past work of a builder before signing on the dotted line.
The Process
You will have many choices to make when building a home, from floor plans to cabinet colors. But before attempting to make any decisions on your own, it is best to sit down with a mortgage advisor to discuss what is financially reasonable. The advisor will help you figure out which type of financing you will need:
With Turnkey Financing, a contractor will essentially fund the build costs for a fee. Once the home is finished, the buyer will get a mortgage to pay off the builder, essentially buying the home from the builder.
A Custom Contract Build means, as the homeowner, you handle all the financing yourself, from purchasing the land to securing construction loans. With this type of financing, the home buyer is responsible for all payments.
The Risks
When making a large purchase like building a home, there are always risks involved. Factors out of your control can range from delayed construction to additional accrued costs. And while you can prepare for some risks, others may be unexpected:
- Budget - Home builds can go over budget, costing you time and stress on top of added fees. You can avoid this by leaving room for unexpected expenses.
- Unpredictable Circumstances – Like many things in life, there will always be issues you can’t foresee — from delayed construction to weather to economic turnover.
The decision process that accompanies building a home can be intimidating, but the experts at Park Bank can help provide you with the tools and resources that you need to feel well-informed and educated.
Visit our Quick Quote tool to get information on current rates, or learn more about loan types and closing costs or apply now on our Digital Mortgage Hub.