Timing your Construction Schedule to Coincide with the Sale of Your Home
Building a new home is an amazing experience. It’s an exciting time if you’ve never built your own home because you finally get to live in a home that has been customized to your family and the way you live your life. It’s also exciting because you get to choose features and design elements of the home – to make it yours, and because it’s a brand new beginning.
While building your new home is exciting there are still some things that can cause hiccups during the process. One of the biggest challenges during new home construction is making sure you time the sale of your existing home to coincide with your new home’s completion date.
If you’re like most people who build new homes you don’t want to move twice so it’s important to plan for that contingency up front, before any ground is broken. You’ll want to be sure that your current home is sold and you’re in charge of the closing date so you can move when your new home is completed. You also want to try to ensure you don’t own two home at one time for any longer than necessary. There are three things you’ll need to know to ensure your move goes as you plan it.
1. Financing – The best way to avoid moving twice is to be in a position to finance two homes at one time. Not everyone can do this so if it isn’t possible for you to qualify to own two homes at once then skip to the second step. If you have access to financing for two homes at once then here’s what you need to know.
Construction-to-Perm Financing is the the best way to finance the construction of your new home while living in your current home. In a nutshell this financing is two loans combined into one. The first loan is short term, normally 3 – 12 months to cover the construction period, and the second loan is your end financing.
- You’ll need to provide your full down payment up front. If you don’t have access to the cash in your current home you’ll need a home equity line of credit on your current home or have access to the cash from another source.
- A draw schedule is set up to pay for materials and labor as construction progresses. There are typically four draws during construction.
- You pay interest on the money that is drawn only, no principal payments are required during this time.
- Your lot can be purchased with the first draw using this financing option.
- Be sure to check with your tax professional if the interest payments are tax deductible.
- When construction and final inspections are complete, the lender will modify this loan into your end loan. You only pay one set of closing costs and a small administrative fee to set up construction-to-perm financing.
- Your appraisal is completed up front based on your final plan and home specifications. You have the actual closing before construction starts and sign all the paperwork for your mortgage. The final modification only takes a few minutes and there is very little paperwork.
2. Selling Your Home. The sooner you secure an offer on your current home the more control you have over choosing the closing date. The less time your house sits on the market the more money you make. If your current house is on the market for more than a couple of months, it becomes stale. Realtors lose interest and show it less and pretty soon you’re going to have to reduce the price and/or accept a lower offer.
To sell your home as quickly as possible you’ll want to present it in the best light possible. Remove any clutter that has accumulated over the years (you can store it in portable storage and have it delivered to your new home making moving even easier) and repair any damage to walls and ceilings. Repaint the living room and entry way and have the carpet professionally cleaned. Consider hiring a professional stager to make your home look appealing to potential buyers.
3. Design and Selections. While you’re getting your home ready to sell you’ll want to finalize the design and selections for your new home. We’ll finilaze your pricing and complete the land survey. We can even apply for a building permit.
Doing the design and selection work up front can save months of time and give you much greater flexibility in timing your closing date with your construction schedule. If you need more specific details on your situation feel free to call us at 651-459-1972 for more information.