Everything you’ve done up to this point has been in preparation for starting and funding the construction of your new home.
The following is an excerpt from the fifth and final chapter of our eBook, Building a Custom Home: What you need to know about custom construction financing.
We hope that you find this information useful in helping you to understand how to finalize the custom construction process and how your payments will work. If you find this useful, please download your free copy of our eBook to learn more about the custom construction process.
How the money works.
During the construction process, you make payments based on the amount you’ve drawn against your loan, not the whole loan amount. As we mentioned earlier, construction is funded through monthly draws.
A representative from your local Washington Federal branch will come out to the property and perform monthly inspections in order to determine how close the project is to completion.
Your monthly draws will be based on the completion percentage. For example, say that after site inspection, your local Washington Federal branch manager confirms that half of the home’s windows are now installed. You are then allowed to draw 50% of the “window” line item in your construction budget. Note that draws are only permitted for work completed and items that are already “attached” to the house. So if you order special windows and the manufacturer requires a deposit, those funds will need to be paid up-front out of your own pocket. Your lender would then reimburse you once the windows are installed.
Plan to communicate daily with your contractor throughout the construction process to make sure that you stay on schedule. Keep your lender informed of any issues or delays that impact your budget or project timing. While it is their job to help you build your home on time and within budget, it is ultimately your responsibility as the borrower. If construction falls behind or you make changes mid-stream, you may find yourself out of money or cutoff from borrowing more until you set things straight.
Enjoy your new home.
Once construction is complete and your new home passes inspection, you will receive your occupancy permit and can move in. If you’ve financed with Washington Federal, your “All-in-One” loan will simply convert at this time to permanent financing and you will begin to make your normal amortizing mortgage payments to Washington Federal. If you’ve chosen a two-step process, then you’ll need to arrange for a permanent mortgage before you can move in and occupy the home.
As you begin your journey, we hope that you have found this eBook to be of value. If you’re interested in getting started or learning more about the process, contact one of our neighborhood branch managers or call us at 800-324-9375. If you plan to build in an area we serve (Washington, Oregon, Idaho, Utah, Arizona, Nevada, New Mexico or Texas), we’re more than happy to answer your questions and provide you with a no-obligation consultation.
We know that building a dream home is an all-consuming process, but for those who want to create a home that is truly theirs, it’s also a fulfilling, creative and rewarding process. Remember that at Washington Federal, we’re truly “invested here.” In fact, we’ve been helping families build homes since 1917.