Financing is key to building a custom home in South Carolina. It’s also complicated and confusing for many, especially those building from the ground up for the first time. How you finance your custom-built house depends on your long-term plans, priorities, and current financial standing.
Most people finance custom builds with construction-only or construction-to-permanent loans, but some use their personal savings instead. To secure financing, you must finalize house plans and know the total cost of the build, which we can handle when planning your new custom home.
Go to our website for more information about Blythe Custom Homes and how we can help you plan and build your dream house in South Carolina.
What Loans Can You Use to Finance a New Custom-Built Home in South Carolina?
To finance a new custom-built house in South Carolina, you may get either a construction-only loan or a construction-to-permanent loan from a trustworthy lender.
Construction-Only Loan
A construction-only loan exclusively covers construction costs, meaning you may have to get a traditional 20, 25, or 30-year mortgage once construction is over. Construction-only loans must be paid in full relatively quickly, often within 6 to 12 months. Supply chain problems, bad weather, and other timeline delays could put you at risk of not completing construction on time.
Construction-only loans are high-risk and often feature large balloon payments at the end of the loan term. They’re common among house flippers and developers, less so with those building family homes.
Construction-to-Permanent Loan
A construction-to-permanent loan finances your new home build and then turns into a traditional mortgage when construction is complete. During construction, you can make interest-only payments. Once construction is complete and the house passes inspection, your payments will increase to include principal and interest, not just interest.
A construction-to-permanent loan is far less risky, and you have decades longer to pay it than you would a construction-only loan. Another perk of using a construction-to-permanent loan for your new build is that you only have to pay one set of closing costs, saving you money and time.
Using Jumbo Loans to Finance Your Custom Home
Many folks building a custom home will use a Jumbo Loan to finance the operation. For more information about jumbo loans, read our specific blog post on this subject here.
What Are the Key Steps to Financing a New Custom-Built Home
Financing a custom home begins with getting pre-qualified, so you know where to set the budget for the new build, which will also influence the house plans we create, and you submit to secure a loan.
Get Pre-Qualified and Choose Your Lender
To get a loan for your new home build, you must get pre-qualified. Choose a lender you feel comfortable with, and confirm with them how much you can confidently borrow to fund construction on your new house without risk of defaulting on the loan.
Finalize Building Plans and Secure the Loan
In addition to the homeowner’s credit score, debt-to-income ratio, and other financial information, the building plans are heavily weighed when lenders approve construction-only and construction-to-permanent loans. We can focus on refining the plans until you are completely pleased with them, at which point you can submit them to your lender for approval. Only viable construction plans will secure your financing.
Get Funds for Each Construction Phase After Inspections
When you are approved for a construction loan to build a custom house in South Carolina, funds will be disbursed to your builder for each major phase of construction. After big jobs are done, like installing electrical and plumbing systems, an inspection is conducted. If the inspection goes well, the next portion of funds will be disbursed for the next phase of construction.
Being responsible with fund disbursements is of the utmost importance, and you can rely on us to use the funds as intended to bring your custom home to life.
FAQs About Financing a New Custom-Built Home in South Carolina
Can You Finance a Custom-Built Home with Your Personal Savings?
You can finance a custom-built home with your personal savings. However, even if you have plenty saved up, it’s often a good financial decision to get a loan for a bit of cushion.
Do You Need to Plan Your Custom-Built Home Before Securing Financing?
You must finalize house plans before a lender will approve a construction-only or construction-to-permanent loan application, which we can handle as you plan your new house in South Carolina.
How Do You Finance a Pre-Engineered Home in South Carolina?
You can finance the construction of a pre-engineered home the same way you would a custom house: by obtaining a construction-only or construction-to-permanent loan. Pre-engineered homes can be built quickly, so a construction-only loan is less of a risk.
What Type of Loan Should You Use to Finance a Custom-Built Home?
While the ideal loan type varies by situation, construction-to-permanent loans are often the most convenient and cost-effective option for homeowners looking to put down roots in South Carolina for the long term.
How Does Your Contractor Get the Funds to Finance a Custom-Built Home?
We get the funds necessary to finance your custom build after successful lender inspections.
How Do You Responsibly Finance a Custom-Built Home?
You can responsibly finance a custom-built home in South Carolina by taking your time planning the build with Blythe Custom Homes, avoiding loans with unfavorable terms, such as high interest rates and large balloon payments, and hiring builders who are committed to staying within the target budget you set.
What Are Common Issues with Financing a Custom-Built Home?
Securing financing for a custom build often requires a sizable down payment. If there’s currently no structure in place, there’s also no asset to repossess if the borrower defaults. So, the lender may require a larger down payment. Construction-only loans may also have higher interest rates and require you to pay two sets of closing costs.
Let Blythe Custom Homes Build Your South Carolina House
Visit us online to plan a custom-built home with Blythe Custom Homes in South Carolina.
