You Have Chosen Your Home Builder And The Site For Your New Home

Category: Finance, Real Estate.

You have explored all that the Florida market has to offer today's home buyer, and you have decided to purchase a home that will be built to your specifications.

You have explored floor plans and options, and have a good idea of what you want. You have chosen your home builder and the site for your new home. Now it's time to explore your finance options. Today's Florida home buyer has several finance options available. The first step. Your first decision will be whether to set up a cash escrow account, or to obtain financing in the form of a loan. Cash funding for new construction.

If you choose to obtain a loan, you must decide whether to go through a lender, or to obtain a builder's loan from your builder. Because you won' t be paying any interest on a loan, cash is most cost efficient method of funding your new Florida home. First, an escrow account is opened with a licensed Florida escrow company and the cash funding for your new Florida home is placed in this account. The procedure for cash financing is very simple. During each phase of construction, payments are made to your builder from this escrow account. When you set up a cash escrow account in this manner, the home site and home are deeded to you, from the date, the buyer the home site is purchased. The escrow company protects your interests and theirs by hiring inspectors to verify that each phase of work on your new home is complete before payment is made to your builder.

Obtaining a loan. With the exception of cash, it is the most cost efficient method of financing your new Florida home. A Construction Permanent Home Loan is the most commonly used funding method for new home construction. The initial stage of this finance method is similar to the cash escrow, wherein payments are made to your builder at each phase of the construction process. This loan type has all the typical closing costs of a traditional loan, with one key difference. When your new home is complete the loan automatically converts( or modifies) to your permanent home loan.

With a Construction Permanent loan you will pay interest on your home site and on the money that is disbursed to the builder for each phase of completed construction. When one uses this finance method the home and home site are deeded in the buyer's name from the date the home site is purchased. This means the interest paid will start very small and increase with each payment made to your builder during construction. When your new Florida home is complete, this loan will convert to your permanent loan with traditional interest payments. If you choose to obtain financing from a lender, you will need to find a mortgage specialist who will go over all of the loan options available to you. Finding a reputable mortgage lender and choosing the right loan. This is important because when it comes to home loans, there is no One Size Fits All.

Be sure to explore each option carefully and choose the best option for your individual needs. Based on your income level and time you plan to live in your new home, your mortgage specialist can help you decide whether to choose a fixed rate, or interest only, variable rate loan. Financing through your builder. Most builders maintain large credit line to offer builder funding to their customers. This is the most expensive method of funding the construction of your home. The credit line has closing costs and interest that has to be paid for each home utilizing this method of construction funding. In most cases, when you choose this type of funding you will pay higher interest rates than you would pay with a traditional loan.

The builder then passes on the expenses incurred, including closing cost and interest, to the buyer. This method costs the home buyer about 1% to 2% more than getting one's own construction permanent home loan. The percentage charged depends on the amount of deposit the customer gives the builder and the amount the home site costs. Most builders add 3% to 6% to the price of the home and home site package for this type of funding. Your construction funding fee will be relative to the down payment you are able to make on the loan. This type of construction funding is useful to home buyers that for any reason cannot get a construction permanent home loan but can get a loan at the end of construction called an end loan. A higher down payment means a lower construction fee.

When one uses this method the home and home site are deeded in the builder's name from the date the home site is purchased and is only deeded to the home buyer after the home is completed and paid for by the home buyer.