Building a Home: How Much Can I Finance?

How much of my home construction project can I finance?

This article is part 2 of our “Building a Home” series.

Watch Part 1:
How Much Cash Will I Need?

Watch Part 3:
How Are Home Construction Mortgages Different?

There are many considerations when financing the construction of a home. Oftentimes, home buyers want to know how much of their home construction project can be financed. The short answer is that at Rural 1^st, the financed portion of the project can vary based on the appraised value of the completed home and property. But as with any home mortgage, there are a lot of moving parts to get there, starting with the type of home you plan to build, the type of contractor you intend to use, and your personal finances. Let’s start with your personal finances.

Your lender will consider your overall income, your credit score, and your debt. When reviewing your income, a lender will consider both the amount of income and how stable that income source is. Your credit score will include things like your loan repayment history, along with your current volume of debts, and your debt is reviewed to determine whether you have enough income to comfortably pay back all your loans, including your home construction loan.

Now, let’s consider the home and property type. The type of home or property you want can affect the amount you can borrow against the property. A traditional stick-built or modular home, or barndominium will allow for the most amount of financing. Rural 1^st is also able to finance unconventional home types, such as machine shed homes, and berm homes, with a slightly larger down payment. And finally, the contractor type will impact your financing too. General contractors oversee the whole project and are considered the least risky. Self-contracted projects carry more risk and require a larger down payment. It all comes down to risk.

Once the final plans, bids, and specifications for the project are finalized, an appraiser will evaluate what the value of the home and property will be when it’s complete and determine a valuation that you’ll be able to borrow against. Having detailed, accurate bids and blueprints of the construction is critical to get the best, most accurate appraisal value. Rural areas often have unique features such as crops, ponds, and outbuildings that can make appraisals difficult.

Rural 1^st, however, specializes in financing rural properties. So, unlike other lenders, we value both the acreage and outbuildings or site improvements on the property to help you qualify for the maximum loan amount. Again, there are many considerations when buying property and constructing a home in the country. And it pays to know a lender that specializes in financing there, along with a network of experienced loan officers who can help you buy and build the country home of your dreams. Rural 1^st has a range of solutions designed specifically for rural living.

To learn more about what makes a home construction mortgage different than a traditional mortgage. When you’re ready to get Closer to What Matters®, connect with a loan officer.