Building a Luxury Home with Guardian Homes

In our previous post, we discussed what factors make a home a custom home. Location
square footage, premium materials, and unique design and amenities made our top list. We also cover in another blog, custom upgrades you should consider when building a luxury home.

Now we are going to take you step by step through how to get started building your very own custom luxury home with Guardian Homes. 

If you’re currently looking to build a luxury home or hope to build one in the near future, you'll probably need to finance your home purchase. Unless you have just sold a larger home or have inherited a sizable estate, you'll need to work with a bank, credit union, or another lender to get the funds necessary to complete your custom home project.

According to the National Association of Realtors®, 86% of homebuyers used financing to purchase their home. That number increases to 94% for first-time homebuyers. The study shows that younger buyers commonly depend on savings for their down payment, while older buyers use proceeds from the sale of their previous residence toward their new custom home.

To help you get started with your financing, we’ve outlined the basic steps of the process below.

Steps of the Home Loan Process

Financing a custom home is somewhat different from getting funds for an existing home. However, the process follows a similar path, from pre-qualification to closing.

1. Prequalification. The first step to getting a loan for your custom home project is to meet with the lender and determine if you meet the criteria for a loan. For this step, you'll need your financial information (tax forms, W-2 forms, etc.). In general, lenders want to see a low debt-to-income ratio. Although you don't need a detailed proposal of your new home at this point, it's a good idea to give the bank an outline of what you plan and an estimated cost.
2. Pre-Approval. You'll want to move on to the pre-approval stage when you get closer to starting on your home project. Pre-approvals typically last for 30 to 90 days, depending on the lender. The lender will give you an amount that they are willing to lend you. You don't have to use all the funds, but you'll know what's available to you. For the pre-approval stage, you'll need more information about your custom home project, including a project timetable and budget. Your builder can help you with this information. You'll also likely need a drawing of your proposed home and a list of materials your builder will need to complete the project.
3. Closing. Once you and your builder agree on a price, you can complete the loan process with the bank or other lender. At closing, which takes around 30 to 45 days, a portion of the funds from your loan will be transferred to the builder and the company can start on your home project. Unlike traditional mortgage loans where the entire amount is distributed at closing, with a construction loan, funds are distributed to the builder at set stages, based on the progress of the build.

Some things you need to know about a construction loan

You need to complete the three steps that we've outlined above before your luxury home builder can start diving into the actual selection and building of your home.

Construction loans usually have higher interest rates than conventional mortgages. Because there is more risk to the lender, construction loans usually cost a little more than a standard mortgage. That's because the bank or other lender is giving you the money based on an idea, not a physical structure. Until the house is built, there's nothing for the bank to use as collateral. 

Once your house is completed, you can generally refinance your loan at a lower rate. Depending on your credit and market conditions, you can usually refinance your home loan once your home is finished (and the bank has a solid structure to use as collateral for your loan).

Down payment requirements are usually higher for a construction loan. Most lenders require at least 25 percent down on a construction loan. Once you complete these three prerequisites, we can dive into the actual selection and building of your home. You can learn more about this process 

To learn more about getting started on your own luxury, custom home, contact Guardian Homes. We've been helping people like you create the luxury home of their dreams for more than 14 years. Talk to our team of home builders in Idaho to discuss building a luxury home near Idaho Falls, Ammon, Pocatello, Rexburg, or Island Park. We also service clients near Park City. If you are interested in building a luxury home in Utah, reach out to our team of home builders in Park City.