Home Construction Financing: "What Will You Need for Home Construction Financing?
Start-up Construction Budget
A start-up construction budget is a cash budget prior to obtaining your construction financing. Builders suggest anywhere from $5,000 to $10,000, depending on the size and scope of the construction.
This up-front expense is considered part of the overall project cost and is often part of the down payment or 'reimbursed' as part of the construction loan.
Down Payment
Generally a down payment of 20 percent or more is needed. The down payment may be cash, equitable securities, or the equity in an existing home or land purchase.
If you are using your home equity, make sure you obtain a true market value of your home and anticipated time to sell your home.
Planned Budget
Know your limits. It can become tempting to add additional items to the home that will place the entire project out of budget. Some buyers have a budget cushion for upgrades and other changes
Documentation
Your submission of an application will require documentation of income and employment similar to a home resale mortgage application.
This will include verification of employment (e.g., W-2s, pay stubs), or if self-employed, documentation of income, savings and investment account statements. In addition, the lender will require construction specifications and cost breakdown for building your home. You will also need to provide the purchase contract or title to the construction site."
Start-up Construction Budget
A start-up construction budget is a cash budget prior to obtaining your construction financing. Builders suggest anywhere from $5,000 to $10,000, depending on the size and scope of the construction.
This up-front expense is considered part of the overall project cost and is often part of the down payment or 'reimbursed' as part of the construction loan.
Down Payment
Generally a down payment of 20 percent or more is needed. The down payment may be cash, equitable securities, or the equity in an existing home or land purchase.
If you are using your home equity, make sure you obtain a true market value of your home and anticipated time to sell your home.
Planned Budget
Know your limits. It can become tempting to add additional items to the home that will place the entire project out of budget. Some buyers have a budget cushion for upgrades and other changes
Documentation
Your submission of an application will require documentation of income and employment similar to a home resale mortgage application.
This will include verification of employment (e.g., W-2s, pay stubs), or if self-employed, documentation of income, savings and investment account statements. In addition, the lender will require construction specifications and cost breakdown for building your home. You will also need to provide the purchase contract or title to the construction site."
