If you’re looking to buy a home, you’re no doubt well aware that the housing supply is limited and prices are high across much of the country.
The American housing market has been affected by a variety of factors that have compounded over the years. New home builds have still not recovered from the Great Recession, meaning that housing inventory has failed to keep up with population growth. The aftereffects of the COVID-19 pandemic, including snarled supply chains and labor shortages, have also contributed to higher home prices — and inflation is still not fully tamed. Large investors have played a role as well, as homes purchased to flip or rent out for profit are removed from the pool of properties available to individual buyers. And finally, high interest rates make homeowners with existing low-interest mortgages reluctant to sell, even if they would otherwise prefer to downsize, upgrade or move to a new area.
As a potential buyer in this tight housing market, you may find yourself in a bidding war and end up paying significantly more than the listed price for a home that isn’t even a perfect fit for your needs, or put off your search altogether in the hopes that the market will ease one day.
Why building might be right for you
But there’s another alternative to consider: building. Building enables you to execute your own vision from the ground up, without having to compromise on style, while avoiding much of the stress of bidding wars and rejected offers. Plus, with new construction, you’ll likely benefit from greater energy efficiency and face fewer maintenance issues.
This process might sound daunting, though. While a construction project is certainly a major commitment (as is any home purchase, of course), there are many resources available to make the process as painless and rewarding as possible.
Construction and lot loans available in the Flathead Valley
Building your ultimate dream home with all the features you’re looking for in a location that works for you can be more manageable than you might think, especially when the right financing is available.
First Interstate Bank offers a number of different financing options to families and individuals who are in the market to build, including all-in-one, construction and lot loans.
• All-in-one loans: An all-in-one loan allows you to combine a short-term construction loan and your permanent financing (mortgage) into a single loan. This loan is available for both conforming and jumbo loan amounts and consists of two phases: construction and permanent loan. During the construction phase, your payments are interest only. When construction on your home is complete, the loan transitions into permanent financing with no need to requalify — and you only pay closing costs once. Your interest rate is locked in at closing with an interest rate float-down option, meaning that if market rates improve prior to completion, you can take advantage of these lower rates.
• Construction loans: A construction loan is a traditional short-term loan, also called a two-time-close, that covers the cost of land, permits and fees, and the building of your home. You pay it off in full when construction is complete. You will need to qualify for and obtain a separate mortgage loan to refinance into for your permanent financing.
• Lot loans: If you’ve found the perfect plot but you’re still not sure of your building plans or the specs of your future home, a lot loan can enable you to purchase the land while you work out the details. This loan gives you a six-year buffer period before you need to break ground.
In addition to construction loan programs, First Interstate Bank also offers in-house builder draw management so you don’t need to manage multiple programs through multiple institutions. Effective draw management — monitoring project milestones, reviewing supporting documentation and inspection reports, disbursing approved funds to the contractor — ensures transparency and accountability and is critical to keeping the project on track.
Luckily, First Interstate Bank has a certified construction lender on hand in the Flathead Valley who can help you make informed decisions about the homebuilding process and navigate all the details so you can pursue your goals with confidence.
To learn more about construction and lot loan options available in the Flathead Valley, please reach out to Katie Williams, mortgage loan officer, NMLS#1998304 at [email protected].
The above content is sponsored by First Interstate Bank. To learn more about sponsored content, email [email protected].