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Episode 5: How Mortgage Finance works for New Construction
Stepping into the world of new construction financing can feel like trying to build a house without blueprints – confusing and potentially disastrous. In this eye-opening conversation, loan officer Zac Daniel demystifies the process of securing a mortgage for a home that doesn't exist yet.
The financing journey for new construction differs dramatically from buying an existing home. Rather than the typical 20-60 day closing timeline, construction loans operate as interest-only lines of credit during the building phase, with payments that grow only as funds are drawn. Zac breaks down how appraisers evaluate plans and specifications to determine what your future home will be worth, and how this projected value becomes the foundation of your financing.
Perhaps most surprising is the flexibility available in down payment options. Contrary to the common belief that new construction requires 20% down, Zac reveals programs requiring as little as 5% down payment, with VA and USDA options offering 100% financing for qualified buyers. For those who already own their land, that equity can often serve as the entire down payment, potentially allowing you to build with no additional cash out of pocket.
Self-employed buyers face unique challenges with traditional mortgage qualification, but Zac explains how non-QM loans can evaluate bank deposits rather than tax returns, opening doors for entrepreneurs who maximize deductions. When evaluating builder incentives and preferred lender offers, getting written loan estimates allows for accurate comparison rather than relying on verbal quotes that might change when application details are finalized.
The golden rule for new construction financing? Never max out your budget. Construction inevitably involves surprises – from site preparation challenges to material price increases – and maintaining financial buffer room ensures these unexpected costs don't derail your entire project. With expert guidance on rate locks, appraisal considerations, and loan conversion options, this conversation equips you with the knowledge to finance your dream home confidently from foundation to finish.
Ready to build your future home with financial confidence? Listen now to avoid costly mistakes and discover financing strategies that could save you thousands.
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By Victorian FinanceStepping into the world of new construction financing can feel like trying to build a house without blueprints – confusing and potentially disastrous. In this eye-opening conversation, loan officer Zac Daniel demystifies the process of securing a mortgage for a home that doesn't exist yet.
The financing journey for new construction differs dramatically from buying an existing home. Rather than the typical 20-60 day closing timeline, construction loans operate as interest-only lines of credit during the building phase, with payments that grow only as funds are drawn. Zac breaks down how appraisers evaluate plans and specifications to determine what your future home will be worth, and how this projected value becomes the foundation of your financing.
Perhaps most surprising is the flexibility available in down payment options. Contrary to the common belief that new construction requires 20% down, Zac reveals programs requiring as little as 5% down payment, with VA and USDA options offering 100% financing for qualified buyers. For those who already own their land, that equity can often serve as the entire down payment, potentially allowing you to build with no additional cash out of pocket.
Self-employed buyers face unique challenges with traditional mortgage qualification, but Zac explains how non-QM loans can evaluate bank deposits rather than tax returns, opening doors for entrepreneurs who maximize deductions. When evaluating builder incentives and preferred lender offers, getting written loan estimates allows for accurate comparison rather than relying on verbal quotes that might change when application details are finalized.
The golden rule for new construction financing? Never max out your budget. Construction inevitably involves surprises – from site preparation challenges to material price increases – and maintaining financial buffer room ensures these unexpected costs don't derail your entire project. With expert guidance on rate locks, appraisal considerations, and loan conversion options, this conversation equips you with the knowledge to finance your dream home confidently from foundation to finish.
Ready to build your future home with financial confidence? Listen now to avoid costly mistakes and discover financing strategies that could save you thousands.