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If you build it, they will come...

Navigate Lending

Just hearing this phrase makes me want to curl up on the couch with a blanket and enjoy some cornfield baseball, but that is not what we are going to talk about here.

It seems everywhere I turn in our wonderful town there are new houses breaking ground or beautiful land just waiting for someone to build their dream home on it. In fact, according to the National Association of Home Builders (NAHB), new home construction is in its third month of record highs, yet new housing starts are still sitting at a whopping 6 percent below demand for purchasing nationwide. With many homebuyers in competitive bidding wars, multiple offer situations and lack of inventory across the county, many homebuyers I talk to are currently evaluating the option of building their own home... they just don't know where to start. Then of course there is the buzz of excitement around our newest housing development, Sage Ranch, that will be breaking ground and bringing highly anticipated new neighborhood amenities to Tehachapi.

So, what are the differences between new construction options and how does someone even go about navigating lending for new construction? Glad you asked. My husband first began building houses back in the early 2000s and as a result of that, as well as personally being a Mortgage Advisor offering construction loan options and working with contractors and new build buyers, I have learned a thing or two.

Let's start with new Residential Developments: this would be your larger scale tract home type of development where the builders/developers create a complete neighborhood plan and build several different home plans in a predetermined area. Think... Sage Ranch. Generally speaking, this is the most common and easiest way to buy a newly constructed home. Sometimes they come with amenities such as a pool, park, or community recreation building.

Sometimes they are just houses complete with sidewalks, streetlamps, and mailbox after mailbox... you get the idea. Generally there are model homes for you to walk through and get an idea for what your options are as you choose your lot, floor plan, upgrades, etc., within the development. They generally have a sales agent, Realtor and lender available to help you, but it is important to know that you can always use your preferred Realtor and your own Mortgage Advisor to help you purchase in a development. Don't assume you have to use theirs, or that it is your best option even though there are generally incentives given for using their team. Smart home buyers will explore options and compare what their best options are. Pro-Tip: it's not all in the numbers.

Next up, there are spec homes, or semi-custom. These are new homes built by contractors, or owner builders, and financed by them using their own resources. Owner builders are not typically licensed contractors but own the land and are an active part of the building process and financing. These homes are designed, planned and sometimes even fully constructed without the buyer's input and design. They are built based on demand, or current design, with any buyer in mind. The financing side of it is like buying a house already done, but if you contract to purchase early enough in the process, sometimes you can make some design choices that are your preference, leading to the semi-custom feel of your new home. We see a lot of this type of construction in Tehachapi. Know that for these semi-custom homes, you can also use your own preferred Realtor and Mortgage Advisor.

The last point I am going to cover is custom homes. Custom home construction can be most confusing and sometimes challenging if the contractor does not have a financing source or requires that you obtain your own financing. Some contractors can finance your custom home and will only require a substantial down payment. This will vary by contractor, but I most often hear the down payment is equal to the percentage down of your financing, or around $25,000. Again, this will vary by contractor and project. You are heavily involved in the design process and choosing the features your home will have. It is likely that you even choose your lot from active real estate listings or contractor owned lots. When you need to obtain personally financed construction, that is where it can get most confusing for home buyers. Let us address that in the next article and as always, the best way to explore your options is to connect with a local mortgage professional who can evaluate your specific situation.

The next few months can be a great opportunity to work on the details, just in time to break ground in the spring!

You can contact Alysha Boles at (661) 858-7214, or visit http://www.advisoralysha.com.