Hello, everyone and welcome back to a new video sean's, a name and today we're going to talk about how you cannot only build but, more importantly, finance a custom. While i help clients home this all the time. I actually tried to personally do this myself. When i tried building at home, but it didn't actually work out because of the actual lot that i chose um, i tried to build a custom house on a private lake in cholo arizona, uh, the land ended up being a little too rocky.

The soil tests weren't. All that great, so it didn't work out, but because of this, i'm incredibly knowledgeable not only on a lender's standpoint on kind of helping someone get approved for the financial side of it, but also on the you know, building and the land selection and all and all That stuff, because i actually tried doing it myself - it's definitely unique and since we just closed on a couple of these one of which i'm actually at right now, um that's gon na start. Building this week i figured let's make a video breaking down every single step in the process, since there are a ton of different steps. So let's do it, but okay, real quick for those of you who don't know.

I run a mortgage company called x2 mortgage and we do all sorts of loan programs, but one of which is custom. Home builds, and i will say they are definitely different and incredibly challenging loan programs to go through. Which is why i want to break down the steps piece by piece today in case you're. Thinking of doing it yourself, so first hit that like button, but the biggest mistake people make when they actually start this process is they think that they need to go.

Buy a piece of land, then, once they own the land, you know they can finance or figure out the build at a later date. This is not what i recommend, though the only time i actually would recommend. This is if you're, going after a highly sought after piece of land where their competition is very high, and you have to close on it. Asap and the reason being is because land loans are actually incredibly challenging to do into finance and they come with horrible financing terms, because land itself isn't super valuable right.

It does have some value on it, but it can be used for numerous things and a lot of times. People realize how expensive it actually is to develop a piece of land, and that leads to a lot of people either just leaving the land. You know having someone else deal with that problem and then the lender is now stuck with a piece of land that they either can't build on, or no one wants to build on it. So that's why landlords come at some very high cost, because the collateral of land is not great, so the better way to build and finance a custom home build is to do what's called a one-time close.

This is basically a loan product where you can finance not only the land but the cost of the build, all in not only one loan, but one closing. Let me paint a picture. Alright, you see a piece of land you go. This is where my custom home build is going to be gorgeous.

I want this piece of land. What you'll do is you'll put an offer on that land and you'll say hey. We want a 60 75, maybe a 90-day close. So we have enough time during that transaction to get all of our building and all of our subcontractors and all of that stuff in order, so we know that we can actually build on this piece of land that way, once you close on that land, you can Actually start immediately building your dream home.

I can't stress this enough. The financing terms this way is so much better. Typically, your rate is only a quarter point higher than a standard, conventional 30-year fixed-rate mortgage and you're getting the benefits of a custom financing option. Now that all sounds fine and dandy and easy to do - and you say yeah shawna, one-time close, is great.

Let's do it there's still tons of hoops. You have to actually jump through to make sure you can get approved for that. One time closed loan because again, there's so much that happens during that transaction period to make sure you are ready to rock as soon as you close to start building. So, if you're interested in doing this, i'm going to break down step by step what you need to do to make sure that everything goes smoothly without a hitch.

On these one-time closed loans step one you're going to want to talk to a mortgage lender. To start now, not only do you want to talk to a mortgage lender, but you want to talk to one with two main things: one do they have access to a one-time closed program, because not everyone does and two does the specific loan officer that you're talking To do they have experience in these programs because if they don't, the process is going to be very, very stressful, then once you do that you do step two which will get your personal finances approved. This is a normal pre-approval pre-qualification process to just make sure that hey your income, your credit, your debt, your assets, everything looks good to be able to afford a loan amount of xyz. For this build then step three you're going to want to talk to a builder or contractor in that area of where you want to be building your home to make sure that hey can they do the build, that's one thing and then two can they do the Build starting on day one after we close on this transaction step, four, which a lot of people don't realize or know about is once you have a builder selected or chosen that builder or contractor has to be approved by the lending institution that you're working with.

So basically, you get your finances approved and the builder has to get kind of their whole business or their whole model approved, because the lender has to ensure that quality work is going to be getting done to again minimize risk, and typically these are done by a Third party, who have more experience in working with builders and the things they look for with a contractor or a builder, is hey. Do you have similar jobs or some sort of history of building properties like this? That you want to do and how's the financials look on the company and just making sure again it's a good good builder to work with for this loan. But once you have your finances approved and your builder approved, you can move to the next step, which is where things start to get a little bit more fun. You can work with an architect to get the plans of the custom home that you want to be built, get them drawn up if you're going to do something completely custom or you can pull some plans from online, maybe tweak and alter some things on those plans.

But this is where you get to pretty much dial in what you want to be building and once you do that you'll basically be able to take that to your builder and say: hey here's, the plans. I want to build. Give me a rough idea of what the cost is going to be on this now. You do not have to get exact numbers and get contractors to give you bids and do all this sorts of stuff.

No, you just want to get a rough idea of how much the home is going to cost, and i want to really emphasize this part, because this is something i had no idea when i wanted to build my own custom home on that lake. I was telling you about at the beginning of the video, because i was looking at some amazing plans and going. Oh, i want to build this kind of log cabin lake house thing it's going to be super cool and i i picked these super awesome. Looking plans and i was like this - is going to be legit and i send it over kind of the builder and i say: hey here's what i want to build and he's like wow that is going to be a very expensive home and i was kind of Thinking i didn't realize it was kind of based on that that was like here's.

The square footage amount. It's gon na cost x amount of dollars per square foot. It's only like a 2200 square foot home. It shouldn't be that expensive, but a lot of things i didn't realize was the roof lines.

You know, if you have like a bunch of little cutouts in your roof lines, that's gon na be more expensive. They also look at things like hey. Are you getting gas on the property if you're going to have gas is there's? Is there hookups on the line that you're getting to? Are you going to have to have like one of those big old propane tanks? On the front i mean there were like so many things i didn't think about, and i was just like: oh i'm, building a custom home. I want it exactly the way i want and then i realized wow that's going to be way too expensive for that small of a of a property or or of a home.

So i went back to something a little more basic make sure that it was actually within my budget, and that was totally new to me, and so i highly recommend once you get some plans, you talk to your builder and actually go hey. What is going to be the rough cost to actually build this thing, but once you have your plans put together and you have basically a rough idea of what your cost is going to be. You can start kind of talking to either your architect and your builder about hey how big of a land do. I need to fit this home on there, because every land is going to have different setbacks, whether the home has to be 10 feet or 12 feet or 16 feet from the property lines.

Depending on what you're doing like i said with a propane tank or maybe you're going to have all electricity going through it is there power ran to it. You want to get all these things kind of talked with your builder and your architect, architect with and once you have a good idea of what kind of land that you need to be looking for now. Only at this stage can you talk to a realtor and say: hey here's. What i want to do: here's the type of land i'm looking for! You can set your parameters very specific.

They can put you on kind of a list to show you what properties show up that it's land that would fit your home, that you want to be building, and now you can actually start looking at land with your realtor, which is like technically step six, because Step six is putting an offer in on a property and getting it accepted. So then we move to step seven, which is basically two things will happen at this point. One, your personal finances are gon na, go through an underwriting process to make sure hey everything was pre-approved on the front end and you technically should be able to afford x amount of loan amount and purchase price and all those good things underwriting is going to be. You know crossing the t's and dotting the eyes and making sure everything is perfect and exact.

It can be a little frustrating at times, so we totally understand that, but this is where your finances get, that fine touch. You know review to make sure everything is good to go and then step two. This is where your actual home project goes through kind of like an underwriting process to make sure that hey everything, we're going to be building is going to be one within the you know. Loan amount that we're going to be giving the lending institution is going to be giving and two to make sure that the project is going to meet.

You know any type of guidelines with the city, the the county, and you know, like the setbacks like we were talking about, so your project's going to be kind of submitted in, and this is where you do need to get bids with all of your subcontractors. For hey, how much is the foundation? How much is the framing? How much is all of this work going to be, and you get your itemized list to say, hey the total project cost is going to be. You know 432 thousand 414 dollars. You know you basically get down to the penny um to make sure that hey the loan that we're getting is going to cover this entire project step.

Seven is definitely the most work and takes majority of the time. That's why i always say: hey go for a 60 to 75, maybe even a 90 day close of escrow to make sure you have time for all of that, but step eight is once your finances and your project is fully approved. This is where you get your clear to close. Everyone gets super excited, because now you can work into the closing process, then step nine you'll go into a title company's office or sometimes they'll send a mobile notary to you.

You'll sign all of your final documents. You'll wire in your cash or close, which is going to be your down payment and your closing costs, and then once title has all of your funds all of your signatures. They can record with the county and fully close out your one-time, close loan and then congrats at this point. You now own the land or i guess the bank kind of owns the land, but you own the land and you can start building the day after which is step 10.

now step 10. The contractor, or the builder basically needs to start right away because they're going to be on a fairly strict timeline, whether it's six months to nine months and basically they got to start working on that project and they're, going to start taking initial draw so they're going To say, hey to start to get, maybe the land ready or maybe our foundation poured. We need 50 grand. So then 50 grand is going to be drawn towards them.

So i can get all that work done once all of that's done. They can say, hey we're going to start doing some framing. We need another 50 gram now they're, just taking draws as the home is being built, and the important thing about this is every penny that they take in draws. That's going to impact your monthly payment during the build phase of these one-time closed loans.

You are only paying interest only payments, so it's not amortized you're only doing interest only payments on the amount of money that is currently drawn each month. So, for example, the first month - let's say they only take fifty thousand dollars to do again, maybe maybe to pour the foundation you're only going to be paying on a fifty thousand dollar loan at an interest only payment and that monthly payment during the build process is Going to get bigger and bigger and bigger as more money is drawn until finally, the home is fully built, which is step 11. once the home is fully built, you're going to be able to actually move in finally, you'll be able to move in, and now your Payment is going to be going to a fully amortized normal, 30-year fixed rate mortgage now, in some cases the lender might re-qualify you make sure hey. Are you still working? You still have the income.

Can you still afford this loan and, if so great, obviously the only times that you pretty much don't have to do that re-qualification process is if you're putting a lot of money down that way, there's a lot more collateral for the lender, but if you're doing the Minimum down you do have to re-qualify. Typically once the home is fully built and again now your payments are going to be normal, 30-year fixed-rate mortgage payments and boom. That's pretty much it i mean that's how a one-time close loan works. There's a lot of steps in the process.

Hopefully i was able to break it down fairly accurately for you, every process is going to be completely different and the builder you work with is going to be the primary driving factor of how well the process goes. If your builder is very slow to get things, or maybe they struggle to get some documents in in time, you're going to have a bad time and the process is going to go on forever and ever. Another important piece is the lender you're working with, if they're kind of all over the place and they're saying hey, you know we need this and then oh now we need something completely different or shoot. I didn't know we needed this and now we're already 40 days in and you need to go get this now and everything just gets, delayed and delayed and delayed.

It can be a very stressful process, so you want to be working with a lender. Who knows what they're doing and also a builder, who knows what they're doing so you can make sure your process is as stress-free as possible, but i will say, as you can tell, there's a lot of steps in the process and it can be a little bit Much but if you have the proper expectations before you get into the process - and you know that there's a lot of steps like i just outlined - it should be a lot easier for you to do, but hopefully this video helped. I know that if i knew all of this before i actually went to go build the home i wanted to build, it would have been a totally completely different process. I would have done so many things ahead of time, um so that i wasn't.

You know 60 days 70 days into our escrow going holy cow. I didn't know we needed all of these bids and all these things and now we're scrambling and then holy cow. The land's, not even buildable and we've been doing all this work for absolutely nothing and i've been spending all that money right, because you got to get your plans which cost money you got to get all these things going your inspection, your your soil test. All these things that just end up costing you more money and if i knew more about it on the front end, i would have probably been able to say hey.

This isn't going to work out a lot sooner and would have saved me a little bit of money and time but yeah. Hopefully this video has helped you and you knew this was coming, but this is where i plug my company x2 mortgage. If you are looking to build a custom home in one of the states we're licensed in, we would love to help you out. You can head over to x2mortgage.com to learn a little bit more about us and again we'd love to help.

Otherwise, i hope you enjoyed the video and found some value in it. That's my ultimate goal. When i do these, please hit the like button on this video. If you did, please drop me a comment down below, otherwise i will see you in the next me.

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