Owning a home is still essential to the American dream. However, not everybody can fulfill this fantasy. Why? Many of them find financing the building expenses virtually impossible. Loans do help you meet those expenses, but, then, you’ll have to arrange the down payment. A recent study conducted by the famous property listing site, Trulia, revealed that 42 percent of Americans prefer spending their lives as renters and not homeowners because of the unfavorable cash down options. Don’t join the league of these poor souls; with the right planning, you can easily overcome this hassle. Start by familiarizing yourself with a few technical aspects:
How Can the Amount of Down Payment Impact the Home Building Process?
While building a new house, the homeowners have to pay a sum upfront, apart from the mortgage amount. This is referred to as the down payment for the home. Considering the current market rates, 20 percent of the mortgage amount is set as the down payment, and according to the new homeowners, coming up with the down payment is the most challenging aspect. Here are a few ways; down payment can always affect your home building experience.
- The more you pay beforehand, the lesser amount you will have to pay in monthly installments.
- If you keep the down payment low, you might miss out on many mortgage plans. And the ones you qualify for will charge you an extra rate of interest.
- If you negotiate to make a down payment of 20 percent less than the asking price, you might have to pay for a Private Mortgage Insurance (PMI).
- If you agree to pay only a smaller amount than what has been asked for, ,the lenders might end up in offering you less than what you require.
Can You Avoid Paying the Down Payment Altogether While Building a New House?
Since paying the down payment has been a limiting factor for new homeowners, many lenders offer complete financing to make up for the crisis homeowners go through. While this sounds to be an ideal option, you still have to pay the closing cost and the PMI. Organizations like the Federal Housing Administration, the Department of Veteran Affairs, and the United States Department of Agriculture do provide 100 percent financing loans, but the rate of interest is much higher than the standard mortgage rates.
Building a new home calls for a lot of planning. There are automated saving options with designated savings account which may prevent you from spending all that you earn. Open such accounts, negotiate well, and you can get rid of the anxiety of making down payments. Having a word with the contractor regarding the expected expenditure will help you form an idea. For any further suggestion of the new building design and cost-effective floor plans, do not hesitate to Contact Us.