Even if you plan to get a loan, don’t forget that you will also need some cash on hand for a down payment for your builder. Overstreet Builders requires about $20,000 for offsite builds and will require a financial commitment from you to start the project. When the contract is signed, we begin working for you; spending time internally, organizing paperwork for selections and permit and organizing for the months ahead. Money will also be spent on plan design, printing the plans, working through engineering, etc.
So let’s look at how all of these finances add up.
Payment 1: Let’s say you have fallen in love with a $200,000 property, if your bank requires 20% down for the lot loan, you’ll need $40,000.
Payment 2: Overstreet requires $20,000 down on the $500,000 building contract (which will include site prep fees and home cost).
You will have put $60,000 down between the two payments above. If you are rolling the lot loan into the construction loan, your Total Project Cost is $700,000 of which you have put $60,000 down.
*If you purchased the property in the past, the bank will apply the equity that you have in the property toward these percentages. *
As mentioned, banks usually require 10-20% down, so depending on which bank you use for your construction loan you may need more cash on hand. If you work with our lenders and you can do a 10% down, you’ll need to have $10,000 more to put down. If your financial institution requires 20% down, you’d need an additional $80,000 to put down!
Call our office for a list of preferred lenders!
Knowing general numbers for each part of the equation will be very helpful in determining your ability to qualify for the home of your dreams. Researching banks for your loans will be helpful in knowing what their specific requirements are so that you are prepared with enough cash for the down payments.
Remember! Don’t assume that you know what your offsite expenses or home will cost. We will happily walk through the offsite expenses with you to determine what you should be ready for. Talk to your financial institution to know what you can afford and then work backwards from there. Keep in mind that your financial equations will change based on if you have a home to sell too.
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