What You Need to Know About New Home Financing

There are a lot of questions to consider when you’re thinking about building a luxury custom home, and some of the most important ones have to do with financing and loans. That’s why the knowledgeable professionals at Sekas Homes want to put their 20 plus years of experience to work for you by answering the questions you may have about new home financing. Continue reading to find out what you need to know about home construction financing.

Do I Need a Construction Loan?

A construction loan is only necessary when you hire Sekas Homes to build on a lot you already own. If you choose to build on a lot owned by us, all you have to do is pay a deposit, and the remainder is paid after the home is completed to your satisfaction. If you do own a lot, Sekas Homes can help you secure a construction loan with one of our many preferred lenders, as well as lock into an interest rate for up to six months at no charge. So, unless you already own a lot, all you need to do is look for traditional new home financing such as a mortgage loan.

Do I Need a Large Down Payment?

This really depends on the type of loan you’re using and what matters to you when it comes to new home financing. There are types of loans (such as FHA loans) that have a minimum down payment requirement below 20 percent; however, if you put down less than 20 percent, you will have to pay for private mortgage insurance (PMI). PMI is a type of insurance that protects the lender for up to 20 percent of the purchase price—the cost is paid monthly along with your mortgage payment. Of course, many lenders require a 20 percent down payment to qualify.

What Types of New Home Financing are Available?

There are a number of different types of new home financing available for homeowners interested in building a custom home. Some of the most popular types of mortgage loans include:

Conventional – A conventional loan is not guaranteed or insured by any government agency, and it usually has a fixed interest rate and payment. Typically, a conventional loan requires a 20 percent down payment and has a 30-year fixed rate (although it can be 15, 20, or 25 years as well).

Adjustable Rate Mortgage (ARM) – An adjustable rate mortgage (ARM) has an interest rate that is controlled by the federal government with limitations on charges. This means that the interest rate can fluctuate without notice, causing the payments to change as the interest rate does. These kinds of loans put the risk of changing interest rates on the borrower rather than the lender; however, these interest rates can be lower initially than those of a conventional loan.

Federal Housing Administration Mortgage Loan (FHA) – This loan is insured by the Federal Housing Administration for FHA-approved lenders. Historically, these loans have allowed prospective buyers with lower incomes to borrow money for the purchase of a home, due to the federal assistance. This type of new home financing often requires a very low down payment and provides closing cost assistance.

Veterans Administration Loan (VA) – This financing option is guaranteed by the U.S. Department of Veterans Affairs that provides long-term financing to eligible American veterans or their surviving spouses. A VA loan is intended to provide eligible veterans new home financing with no down payment required.

Learn More About New Home Financing

If you’re interested in building a luxury custom home in Northern Virginia or Washington, DC, contact Sekas Homes today. We have a number of experienced and extremely competitive lenders who can service all kinds of homebuyers to fit the loan product that best meets their needs. Our lenders provide free extended lock periods exclusively for Sekas Homes buyers—contact us today to learn more and select the right new home financing for you.