Homebuilding Basics

Building your own home is an exciting, and very personal experience. Find out what you need to know about financing your construction and what to discuss with your builder.

BENEFITS OF BUILDING A HOME

  • You Customize the Home. Searching for the perfect home can be difficult and can take a long time. Building a custom home lets you check-off all the “must haves” you desire in your home.
  • More Affordable than Renovating. Often times building a home can be more cost-effective compared to renovating an existing home.
  • Lower Home Maintenance Costs. Moving into a new home keeps you from having to prematurely invest in costly repairs to aging appliances and home features.

PREPARE FOR FINANCING YOUR HOME CONSTRUCTION

  • Signed Construction or Purchase Contract. Before you can receive a construction loan, you will need to provide your Mortgage Banker with a signed construction or purchase contract with your builder or developer. Information outlined on this document includes the cost of land and construction, the construction start date and completion dates. This information will impact your loan.
  • Your Borrowing Capacity. Your Mortgage Banker will work with you to determine your borrowing capacity and the best loan structure for your home.
  • One-Time Closing (aka Construction to Perm Mortgage). This is one of two ways you can structure your construction loan. With a one-time closing construction loan you complete one loan application and one closing. The financing covers the home construction process and then automatically converts into permanent financing once construction is complete. One-time closings typically save you money on costs and fees, and you can use the land equity as a down payment on the loan if you already own the lot.
  • Two-Time Closing. This is another way you can structure your construction loan. With a two-time closing construction loan you apply and qualify for two separate loans – a short-term construction loan and a long-term mortgage. During the construction phase, you will only be responsible for interest-only payments, with monthly payment amounts increasing as funds are utilized. Once construction is complete, the mortgage loan will be considered a loan refinancing, paying-off the construction loan. When compared to a one-time closing construction loan, a two-time closing typically has lower modification and underwriting fees, and lower interest rates, as the interest rate can be locked after construction is complete. You also have the flexibility to increase the mortgage amount due to cost overruns.
  • Developer Finances the Build of Your Home. If the construction of your home is financed by the developer or builder, you will need to purchase your home from the developer or builder. Therefore, you will need a traditional mortgage and not a construction loan. For more information, contact your Ameris Bank Mortgage Banker.