Choosing to build your first home is exciting. You get to decide on the land, the design of the home, and its color. However, there are some challenges you will face. Considering these financial obstacles in advance can improve the chances of you enjoying the home building process.
1. Do Research in Advance
Take the time to research builders before you agree to work with one. Pay close attention to what others say about their reputation. When looking for trusted home builders in NC, or your local area realize that the cheapest option is not often the best option.
You want a builder who can offer you various building plans and help you find the ideal lot for your dream home. A good builder should offer events and webinars. These will provide information on how to design your custom home and financing options.
Working with the right home builder will make the process easy. Pricing will be affordable. You will walk away with a home buyer warranty.
2. Save Money in Advance for Your Deposit
It can be hard to save money for your deposit if you are paying rent. You may need to find a lender that requires little or no savings. If you do need a down payment, look for a builder that will be able to work within your current financial possibilities.
You need to go into the building process with a clear understanding of your current expenses and income. You may need to cut back on certain luxuries in order to save up enough money to secure the home of your choice.
3. Minimize Debt and Maximize Credit
There are little things that you can do in the lead-up to applying for a mortgage. For example, some future home buyers get a side hustle. It is important to pay off your credit cards, maximize your tax return, and set up a direct deposit into savings that is set aside for your house building.
You can use the 30-minute rule. Before making any purchases that are not necessary, wait 30 minutes to think about it. If you realize that you do not need the item, put the money you would have used for the item in your savings.
4. Become Familiar with Finance Options
Finding adequate financing can be one of the biggest challenges you will face as a first-time home builder. There are several factors that can impede your financing application from getting accepted.
You can prepare yourself and improve your odds of getting accepted for financing by getting a stable job and keeping it. You need to have money saved in the bank. Even if you are only working with a little bit of money, start saving now.
You need clean credit and a clean financial record. Pay off all of your debt if you can. The less debt you have when beginning the process, the better. Finally, you need to have enough income to pay your mortgage.
5. Evaluate the Amount You Can Borrow
North Carolina residents need to evaluate the amount they can borrow before getting financing for their homes. This means you need to create a budget. List your monthly income and your expenses. This will let you know the amount of money you are spending every month. You will see how much money you have extra to use toward a mortgage.
You want your budget to be realistic. This means you should have a buffer for unexpected expenses and changes in interest rates. Take into account the lending criteria of your lender. This can fluctuate between banks.
Generally, banks are going to be concerned about your current income, your credit card debt, your savings history, and your employment status. They will use the loan to value ratio to determine your minimum deposit.
After lenders evaluate your loan application, they will tell you how much you can borrow. You now have the responsibility of making sure that the amount you are borrowing and the monthly payments you will have work with your income and lifestyle.
Build the Home of Your Dreams
Building the home of your dreams can be a lot easier than you imagine. It does take research, a stable income, and an understanding of the financing process. However, when you have these things, you are well on your way to building a home you will love.