Most people fall victim to the belief that you can't build a house without the ability to obtain a construction loan, or without having deep pockets. However, there is a way! When you stumble across a builder who "finances" their own builds, this makes it all possible! This means that you can actually build a brand new home when you are using traditional financing such as USDA, FHA, VA, or Conventional loans.
How is it possible?
It's quite simple actually - the builder is selling a final finished product, which the lender uses as the collateral to back the mortgage should the buyer default. With construction loans, there's no collateral to back the loan because the house has not been built yet. But when you build a home with a standard mortgage, the builder "finances" the build of the house by financing and/or purchasing the materials needed to build and pay subcontractors directly. It's very similar to buying an already existing home, but now you have the ability to build what you want rather than settling for what you don't want!
What's the process?
When given the ability to compete against your own budget rather than other buyers for an existing home, you have more flexibility with what's possible. You also have more options for what can be done (within budget). While staying within your budget, you're given the ability to build your home rather than buying an existing home. When working with a builder who gives a buyer such flexibility, the buyer has the ability to pick the land, the style of house, and all other details that go into the building process! Obviously there are a lot of little details (that can also be major) that come into play when building - this is intended to be a general overview.
The way it works is you find the land you want to build on, the builder buys the land and builds the house! All that is needed on the buyer's end is the pre-qualification/approval letter, and whatever deposit is agreed upon. From there, the lender begins the underwriting process while the builder begins the building process. Once the house is complete, the lender will send an appraiser to appraise the property and ensure it is 100% complete (or to whatever requirements the lender has, as these can vary). Afterwards, if everything looks good, the buyer and builder close on the property!
So the answer is yes, it's possible to build a new home using traditional financing. The key is to find the right builder!
If you're in the market for a home in New Hampshire, and you're interested in learning more about building a NEW construction home using a traditional mortgage - Contact us today!