Navigating the waters of construction financing for a custom wood home can seem daunting if you’re not up to speed with the financial products and potential pitfalls. Use the following questions to start a conversation with your lender about financing challenges during the construction of your cabin.
1. What comparables are you going to use to appraise my home?
2. How many closings am I going to go through?
3. How many times are you going to appraise my home?
4. During the construction period, what mechanism/formula do you use to disperse loan funds?
5. How do you handle advances on the construction loan? Do you pay for materials before they arrive at the job site?
6. How do you calculate, and then collect from me, interest during the construction period?
7. How long can the construction period be? If I take too long, what happens?
8. If I have a life-changing event (e.g., retirement, change of employment, divorce, etc.) during the construction period, will it affect my construction loan or my permanent loan?
9. What are my loan options on the permanent/end loan?
10. What happens if I have cost overruns? Can I borrow against the loan for things I didn’t see coming?