There are two basic ways to finance the building of a home in Virginia (outside of paying cash out of pocket).
One can either use our company’s services to finance the construction of the home and put a permanent mortgage in place at the end of the construction process, or one could get a coperm loan that finances both the cost of construction and the permanent mortgage.
If you would like to go the route of only getting a permanent mortgage, that is fine. Blue Ridge Custom Homes LLC is set up with credit lines for the purpose of financing construction projects. So, once we have signed a contract with you to build your home and you have provided a “preapproval” from a lender showing us that a mortgage will be in place at the end of construction, we are ready to start. All you have to do is make sure that the mortgage is in place when the project is complete.
Another option is a coperm loan. These are loans that are designed to cover both the construction of the project and the permanent mortgage in one closing. The advantage here is that by only having one closing, there is some savings in that there is no duplication of closing costs. However, in recent years, banks have become very tight in their lending standards and the down payment required for coperm loans can be an issue. If you do not have 20% equity in a project, typically your lender will require that you put this money down as a down payment prior to closing on the loan at the beginning of the project. If this is problematic, we should look at using Blue Ridge Custom Homes’ financing as this will only require a minimum down payment.
The cost to you, the customer, will be similar regardless of how we do it. There are typically slightly fewer closing costs in a coperm situation due the advantage of one closing. With coperm loans, your bank will require that you make monthly payment on interest only on the balance of the amount you have borrowed (which gets progressively larger as the project matures). These payments also exist if we finance the project but will be built into the cost of the home rather than be passed on by monthly payments to your lender.
We can use either option on land owned by us or on land you own. Basically, we are very flexible and can find a way to do virtually any project that makes financial sense. We only need to discuss your situation and see what approach fits best for you.
Contact us for questions about how to finance construction.