The moving and home building experience is an exciting one, to say the least. There’s the opportunity to build your dream home with large, open floorplans that can provide ample room for your family and loved ones. You can upgrade your kitchen, choosing everything from countertops to cupboards, not to mention brand new appliances that will last you for years to come. You’ll finally be able to flex your creative muscles with home customizations when you work with a builder.
When faced with a task as big as building a home, there are also more logistical items to consider such as the finances, scheduling, as well as the nitty-gritty details associated with the move itself.
That’s why we’re going to focus on the finances today, answering whether or not you can get a loan to build a house and exploring what that means. You often hear about home loans or mortgages as they pertain to buying a home, but what about those looking to build their dream home from the ground up?
The loan type you’re looking for is a new construction loan and the process to get one is almost identical to getting a loan to buy an existing home.
After talking it through with those directly involved (spouses, partners, family, etc.), you will need to meet with a lender and get pre-approved for a reasonable budget that you will be able to realistically pay off.
Here are some things you can do to improve your chances of pre-approval:
Once you have a more solid budget in mind, it’s time to figure out what you want in your customizable home.
Now is the best time to make any structural customizations you want in your home, since these can be much more costly to change down the road once your home is complete. Some examples of structural changes you might consider are higher ceilings, third car garages, fireplaces, and room pop-outs.
Customizable home communities and specialized home builders are booming. It seems like everywhere you turn, there’s a new community with anything and everything you might want in a new home, from varied floor plans to different amenities.
Be sure to investigate the various communities offered by EDGEhomes to get a feel for what you will personally want in a home.
The simple answer to the overarching question is, yes, you can get a loan to build a house, but there’s more to it than a simple yes or no answer. As is the case with any type of loan, there are different loans for different purposes.
Many private lenders offer VA Loans, which are great mortgage options that are either guaranteed or partially backed by the Department of Veterans Affairs, depending on whom you sign with. Typically, these loans are extremely flexible and powerful, helping countless service members find and finance homes.
VA Loans are particularly powerful because of the flexibility and $0 down payment. They operate differently than typical mortgage loans, so to learn more about how they work and what’s special about them, check out this resource.
This mortgage loan is offered by FHA-approved lenders and is insured by the Federal Housing Administration (FHA). Typically this loan works for low-to-mid-income seekers, as they require a lower minimum down payment and credit scores than other loan offerings. According to Investopedia, in 2019 up to 96.5% of the value of the home can be borrowed, requiring a down payment of 3.5%. You can get that rate if you have a credit score of at least 580. If your score falls between 500-579, you need not worry because you can still get an FHA loan if you make a higher down payment of 10%.
This loan is the most popular among first-time homebuyers, with good reason.
Specific to the state of Utah, this type of loan varies based on credit score, debt ratios, income, and the price of the home. According to the Utah Housing Corp website, this loan can apply to any home located in Utah and includes everything from single family homes to condos to manufactured home communities and planned unit development plots.
A Utah Housing Loan requires a minimum credit score of 620 and the qualifying monthly income varies from anywhere between $8,900-$12,500 depending on which county the property falls in.
This mortgage loan is not guaranteed or insured by any government agency (including the FHA). They’re available through different private lenders like banks, credit unions, and mortgage specific companies. The rates and terms are typically fixed (usually at 15, 20, or 30 years), with current APR rates available here. That being said, it’s possible to choose an adjustable-rate mortgage (ARM) from some lenders.
Conventional loans are a lower cost than many, if not most of the government programs on the market, as government offerings tend to require some sort of mortgage insurance. According to NerdWallet, if you put at least 20% down you won’t have to pay for mortgage insurance as you would elsewhere. These loans are available for anything from primary homes to investment properties.
Down payments and mortgage rates will vary based on credit history and credit score. That being said, the minimum credit score needed for approval is 620 for conventional loans, but having somewhere around 740 is best if you’re looking for a good mortgage rate.
So, the gist with conventional loans is that they generally have a higher out-of-pocket cost than other mortgage loans due to the various fees, from origination to appraisal and everything in between.
Figuring out where to live and what to prioritize are big steps in the search for a home. One way to alleviate some stress is to trust award-winning industry professionals such as EDGEhomes. From a top-notch customer care team to designers and constructors that know their craft, our staff is as knowledgeable as they are kind, and they want to help you find your way to your next home.
Worried about a community home being too “cookie-cutter”? Don’t be. We have an extensive catalog of different design choices from the exterior to the interior and can make our model floor plans fit your needs through impeccable attention to detail and customization.
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