Financing a New Home: Understanding Your Mortgage Options

Before you commence to build a new home, you’ll need to be clear on mortgage loan options, as there are some attractive ones available. If it’s your first time buying or building a house, it’s essential to know what type of mortgage product option suits your needs best and then to find a lender who can deliver that type of loan with the lowest interest rate possible. Below are the top mortgage loan type considerations.

Construction Loans and Significant Benefits

A construction loan is only an option when building a new home. A construction loan can be separate from your mortgage or be a construction-to-permanent loan that merges the two together. Danleigh Homes can guide you through the choice of your best option. There are many benefits, which include the following:

  • You can lock your interest rate in for 12 months, and when rates are rising, this is a huge benefit to avoid the risk of upward pressure on rates.
  • You can avoid two moves most times by not having to immediately sell your existing home while the new one is being built.
  • There are closing cost savings inherently built-in with Construction Loans.

Conventional Loans

Conventional loans fall into two categories: conforming and non-conforming. What makes a loan either of these types is how they align with the Federal Housing Finance Agency (FHFA) standards. Non-conforming mortgage loans apply to higher-priced homes. The strategy in how much down payment can dramatically impact your permanent rate.

Fixed-Rate Mortgages

A fixed or adjustable-rate mortgage refers to the interest charged during the life of the loan. A fixed-rate mortgage maintains the same interest rate for the entirety of your loan payback period. If you catch the housing market when the interest rate is low, you can lock it in and not be subject to rising rates. In new construction financing, there are strategies to implement this type of financing.

Adjustable-Rate Mortgages

An adjustable-rate mortgage has a fixed interest rate for the first number of years. After that, it is subject to change with the market. The interest rate will change once a year according to the market after an initial fixed-rate period. This is a very effective means of enjoying a fixed rate for periods of 7, 10, or even 15 years. The average household moves every 7 to 10 years. You also have the option to refinance at any time leading up to the adjustment period. This can provide significant savings.

Government Loans

Government-insured loans include VA, FHA, and USDA loans. With government loans, many times, you don’t have to pay as high of a down payment and may feature less stringent credit guidelines. USDA loans do not require a down payment but come with fees; VA loans are for active and veteran military purchasers and can apply to new construction financing.

Proper Financing Guidance

Proper Guidance in selection of your New Home Construction Financing

Danleigh Homes can provide general guidance on the available financing options. Better yet, we have aligned with the top Construction Permanent lender in the market that can help you to assess all of your options and target those programs that are the best fit.

Ready to start the journey of building your dream home? Contact Danleigh Homes today for guidance on new home construction financing options and to explore our custom home designs!