Building a dream home is a goal for many Veterans after they retire from military service. Although it can be confusing knowing where to start and how to finance the build. For military families, there are a few options to obtain construction financing.
- Builder financing: is when a borrower goes through the homebuilding company (large or small) to get financing to build the home. If the home is part of a large subdivision, sometimes costs can be comparable to purchasing a home already built. However, if a borrower is looking to purchase land and build a custom home outside a of traditional builder subdivision, costs can be high and often there are hidden fees that may surprise borrowers. It is important to do your research before selecting builder financing.
- Lender financing: can be a great option for borrowers, although there are few lenders who offer construction loans. Fortunately, AAFMAA Mortgage Services LLC does offer a proprietary product, the Construction Advantage Loan. This loan is available to current and former military families.
- Pay Cash: The final option would be for the borrower to pay for the build completely in cash. Obviously, this option isn’t realistic for most people.
Some Things to Note
- Down payment and risk: Sometimes the biggest risk in building a home is making a down payment prior to the construction of the home. There is some risk if the homebuilder is having financial challenges or may not be the most reputable – leading the builder using the down payment for itself, instead of putting it toward the funding of the new home construction. This is why it is important to do research on every builder before choosing one. Also, it is always a good idea to obtain a fiduciary.
- Choosing a lender and builder. When choosing among builders and financing options, make sure all risks are understood. Often times a builder will negotiate upgrades for counter tops, appliances, etc. while neglecting to discuss financing options. The cost of building a home can add up quickly if you don’t discuss fees, hidden costs, and upgrades beforehand. Sometimes the cost of building a home is significantly more expensive than purchasing an existing home. Weighing all the options and their costs is critical to ensure you get the best possible outcome.
We can help. Learn more about construction financing from AAFMAA Mortgage Services LLC.
If you’re a servicemember or a Veteran and you want to build your next home, talk to the experts at AAFMAA Mortgage Services LLC. We’re ready to help you get the best loan that meets your needs. Get a free mortgage assessment today or call us at (877) 387-6856 to get started.