How to Finance a Custom Home Instead of Buying an Existing Home
Hesitant to invest in a home that doesn’t match your priorities? You have options.
Even as markets in many areas begin to cool down, many homebuyers struggle to find homes that truly speak to their preferences, lifestyles, and priorities. While many hopeful homeowners are aware that custom homes exist as an option, the finer details of the benefits and the financing process can still be too intimidating for many people to try to tackle. Here are a few things you should know about how to finance a custom home.
Loans and Deposits
In order to build a home, most buyers will need to take out a construction to permanent loan. This type of loan will roll over into a traditional loan once construction is complete, but will allow for the correct draws to be taken out as the construction process unfolds. For loans that exceed Federal Housing Finance Agency limits, buyers will need a jumbo (nonconforming) loan, which will come with a higher interest rate. Depending on whether you already own a lot, you may also need a lot loan.
At the beginning of the process with Atmos, you’ll also pay an Atmos Deposit that totals 1 percent of the estimated value of the build, capped at $5,000. This goes towards completing due diligence on your lot, creating your home plan, and more. If you cancel, this deposit is refundable, minus any expenses already incurred.
Down Payments
Required and recommended down payment amounts will vary based on factors such as:
The type of loan you end up using
The estimated value of the home you’re building
The amount of equity you’re bringing from a previous home
In general, down payments can range from 5% to 20% of the loan amount, or even more if you’re able. In most cases, putting down less than 20% means you’ll have to pay Private Mortgage Insurance, but this can still be a good option to get you into the home of your dreams.
Timelines
Understanding the general financial timeline of building an Atmos home can help you determine whether it’s the best course of action for you.
Atmos deposit
Land due diligence and earnest money
Pre-construction closing
Build and move in!
Benefits
While there may be a few extra steps and considerations for building a custom home compared to buying an existing one, the good news is, you never have to figure it out alone. Working with Atmos means you’ll have guidance every step of the way, if you desire it! Work with your own lenders, or choose from our partners — the choice is yours. From financing to design, the experts at Atmos are ready to provide the information you need to make the right decisions for your new home. With a dedicated project manager, you’ll be free to be as involved as you choose in the entire process.
Above all, building custom means you don’t have to compromise for a home that doesn’t meet your needs. Instead, you get to prioritize your must-have features and a budget you’re truly comfortable with. With Atmos, it’s never been easier to build your dream home. Get started today!
