Children often plan their future houses, penciling treehouses, fire poles and slides. While the exact plans change quite a bit, some adults never let go of the dream of building a home of their own.
As interest rates fall and temperatures warm, many Fort Collins residents will start the process of building houses that break the mold and suit their needs.
“We get to see the owners’ excitement as their dream home, their perfect home, comes out of the ground," says Paul Watkins, senior commercial loan officer at Elevations Credit Union.
Connecting with lenders early in the process helps home builders preview the road ahead and help them prepare.
“They don’t need to have made every decision already to start that conversation,” Watkins says. “The sooner they can engage a lender the better.”
For people considering custom builds, Watkins offers more tips:
Over budget and plan contingencies.
The plans for a home can change quite a bit, but a loan may not reflect the cost of the final plans.
Over budget to help give yourself a cushion, and plan to have contingency funds above the contractor’s estimated costs in case of cost increases.
Construction costs do not always equate to appraised value.
Many people assume they’ll make back the cost of higher quality materials, fixtures and innovative designs. But these elements are just one factor of home value.
Having as much detail as possible on a “Specification Sheet,” prior to appraisal, helps ensure the appraised value reflects those aspects of your home.
Expect construction lending to work differently from mortgage lending.
Though there are multiple construction loan types, they tend to have a shorter term than mortgages and require much more money down. Think a handful of years and 20% down versus 20-30 years and 3-10% down.
Do your due diligence on your contractor.
Lenders like Elevations will typically require a certified contractor for a project. Beyond that, make sure they have experience and expertise in building homes like the one you’re planning and check their references.
If a contractor doesn’t deliver, it could cost you much more and complicate your funding.
Your land should be free and clear before you start construction lending.
Make sure you have the legal right to build on the piece of land you’re planning. To help ensure a project is not rushed, many financial institutions like Elevations also prefer you to already own the land before looking into construction lending.
Find a lender who can guide you through the process.
For example, Elevations helps keep projects on track by making sure lien waivers (proof of payment for work or materials) get signed right away, which helps builders and contractors get paid appropriately.
Elevations takes pride in protecting their clients’ interests throughout the lending process, even sending inspectors to review construction progress.
“A new home build is often the largest asset someone will own, and we take that very seriously,” Watkins said.
Once an Elevations construction loan is complete, our lenders offer a variety of options, to convert the loan into a mortgage that fits the homeowners’ needs. The top credit union mortgage lender by purchase volume in Colorado, the organization offers efficient mortgage processing. This makes it simple for homeowners to convert their construction loans to mortgages and build their dream homes.
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