"Built On Your Lot" Home Financing

"Built on your lot" home financing is similar though slightly different than traditional home financing. And, since financing a new home requires both time and money, we hope the information below will help save you some of each.

Interim Construction Financing

Building a new home generally requires two different types of loans. First, a short-term or "interim construction loan" is necessary to pay bills during the construction of the home. After the home is completed, a permanent mortgage must be obtained to pay off the construction loan. Most builders will require that you first obtain and then make monthly payments on an interim construction loan for the entire time your house is under construction.

Note: If you qualify, Tilson has a program that does not require monthly payments. With the unique Tilson EasyBuysm program you make no monthly payments until your home is finished. Be sure to stop by or call your closest Model Home Park for additional details.

Permanent Mortgage Financing

When you shop for a mortgage, you will find a variety of choices in both fixed and adjustable mortgages. Adjustable Rate Mortgages (ARMs) have various indexes for determining when, how, and how much rates will change. If you are considering an ARM, determine if it has a limit on how much the interest rate can rise over the life of the loan. This feature is typically referred to as a "cap". Mortgage terms usually range from 15 to 30 years. Regardless of what type of loan you choose, check the number of points each lender will charge to grant you the loan. Lenders offering the lowest interest rate sometimes make up for this with higher points and/or closing costs.

The "down payment" required by the lender to purchase a new home for construction on your lot is a small percentage of the total purchase price of the land, home, and other onsite improvements, depending on the financing chosen. The down payment can be in the form of equity in your property, improvements to your property, cash, or any combination of the above. If you own the property outright that you plan to build on, your equity can usually serve as the down payment for your new home. Sometimes the balance owed on your property can be included in your mortgage loan. Talk to your lender for your different options. (If you do not currently have a lender, choosing one familiar with "built on your lot" mortgages can save substantial time and aggravation.)

One significant difference in "built on your lot" mortgages is the "as-built-appraisal" which is done prior to issuance of a full mortgage commitment. For the as-built-appraisal, an appraiser evaluates the home plans and specifications along with your specific property to estimate the total value after completion. The lender will then consider your mortgage for a percentage of that value. Once again, it is very important to deal with a lender experienced in "built on your lot" mortgages to avoid having your property undervalued and to ensure timely approval of your mortgage.

Note: Because inexperienced lenders and appraisers can take substantially longer to complete loan arrangements, even delaying construction, Tilson recommends it's affiliated lender. Should you decide to use this lender, not only will you benefit from time-tested "built on your lot" experience, but Tilson will pay your loan origination fee. Be sure to stop by or call your closest Model Home Park for additional details.

Calculating Monthly Payments

You can estimate your monthly payments on a specific house cost by using the our Mortgage Calculator. Remember, however, that your total monthly payment will typically consist of four or five parts: (1) Principal, the amount you are paying back; (2) Interest, the cost of the loan; (3) Property Insurance; (4) Property Taxes; and (5) Private Mortgage Insurance, which is required on all loans unless you have a 20% equity position. The mortgage calculator only calculates the first two components of your payment because taxes and insurance vary greatly depending upon your property location. To estimate tax and insurance costs, contact your insurance agent and the local taxing authority.

Please use our Mortgage Calculator now, and give us a call if you have any questions about financing a Built on Your Lot home!