Custom Home Builder: Construction Loans Made Easy

Previous Article: Picking out your lot

Building a new custom home on your lot or land can be more difficult because of the loan process. CMS Homes, LLC, offers the Easy Build Program to help take the stress out of the process. First, let’s bring you up to speed on loans required for your new custom home.

Two types of loans are required when building a new home. The first loan is the Construction Loan and the second is the Permanent Loan.

The Construction Loan

Construction loans are typically obtained through a conventional lender (a bank). Construction loans typically require between 20%–25% cash or equity from the borrower. The equity (difference between the lot value and the lot loan) in your lot can count toward the required equity. Construction loans are typically one year in length and cost 1%–3% more than the Permanent Loan. Borrowers typically pay interest only during the construction process. Construction Loan lenders usually require the borrower to have a written commitment from the Permanent Loan lender to ensure you can get the funds to pay off the construction loan.

The Permanent Loan

This loan is the same type that you would get on any home. These loans are typically 15–30 years amortized so that the loan is paid off at the end of the term. Down payment requirements vary from 100% USDA loan to 20% down conventional loan. In between there are products like the 3–5% down FHA loan and many other products.

So how does CMS Homes make this process easier for you?

We offer a one-loan process to our home-building customers. If the customer and the property meet certain criteria, we will obtain the construction loan for you so that you only have to go through one loan process and close that loan when you receive the keys to your new home.

To participate in our Easy Build Program requires the following:

• 10% down or 10% of the total purchase price in lot or land equity.
• Deeding lot title to CMS Homes, LLC.
• Satisfactory pre-construction appraisal of lot and house.
• Satisfactory permanent financing loan commitment prior to start.

For more information on the Easy Build program contact us.

See all Custom Home Building 101 Articles

The Easy Build Program is contingent upon the homeowner obtaining approval from the lender and may have additional requirements based on the lender’s requirements.