It’s important to know about construction loans and how they work?
Since building a custom home is a substantial investment, many people will require a construction loan to finance the process. Your construction loan is structured a bit differently than a regular home loan in that the lender won’t release all the funds at once. Instead, the lender will work with your builder to determine a budget, and will then release the funds in periodic payments to your builder. These periodic payments are known as draws. They’ll be paid out after each stage of your build.
Another way construction loans can differ is in the size of deposit lenders require. Because construction loans can be seen as inherently riskier, lenders might require at least a 20% deposit. Before you seek out financing, you will need to have a full set of detailed house plans and specs. Your lender will use these to help determine the value of your home, and therefore of your loan.
If you are not already working with someone, feel free to contact Macatawa Homes for a list of our preferred lenders. You can also message us on our Facebook page.
