Financing Your Vacation Home Plans

Building your vacation home plans? Every step of the process can be a new challenge. Most importantly, you really need to get pre-qualified for a mortgage from day one.

Whether building a new second home or buying an existing home, this first step is the same. By contacting a lender and providing them with some basic information regarding your debt, income and assets, you can find out the size of mortgage for which you are likely to qualify. Then, before that first shovel of earth is turned, you should make sure you get final mortgage pre-approval. This involves filling out a mortgage application and supplying a lender with the necessary documentation to check your financial background and credit rating so you will know exactly how much you can afford to spend.

I highly recommend finding a lender who is a construction loan specialist, preferably someone who has built their own home before. We were fortunate enough to have friends who had built their own home in the mortgage industry. I cannot tell you how much time and effort we saved by having a specialist on our side.

Don't just go down to the local bank and pick up a construction loan without asking if there is someone who specializes in construction loans. These loans don't go live with payments until your home is built so the terms are critical.

Your first guess at what your home is going to cost you is rarely the actual final cost. Be aware that you can add thousands of dollars to the base price of a home very quickly if you get carried away upgrading the standard flooring, cabinetry or lighting. It’s important to know exactly how much you can afford and to budget accordingly. This is a vacation home so decide what you really need verses what you really want.

How does that parlay into your financing? Simple, an experienced home builder won't just give you the cost of the home on your loan but will add a little pillow for those inevitable overages. That faucet you had to have didn't cost much more but every little bit does effect the overall budget and the last thing you want is to have to come up with more cash at the 11th hour.

Make sure you have access to cash up front otherwise there are some trades that just won't work for you.

Also, be prepared for delays. No matter what time frame a builder gives you, there is always the possibility of delays. Inclement weather, shortages of supplies and labor problems can all factor into delaying the completion of your home. Be aware of this going into the building process and be prepared to be somewhat flexible. Make sure that your loan doesn't start maturing before your home is built.

It is critical when building your vacation home plans that your financing be in order first so you can truly start enjoying your trips from day one.