Why Having An Available Cash is Important

Published by cravat | Filed under Buyer / Seller Tips, Miscellaneous, Real Estate

If you are planning or starting to build your own custom made home, the value of having an available and adequate amount of funds on hand cannot be emphasized enough. When you are having a construction there is nothing like lacking of cash or none at all because this automatically means slowing down of your project or even putting a full stop to it.

You may ask why do I still need to have cash standing by if I am planning on getting a construction loan? The answer is because there will always be limitations and processes that will hold the money up. When you have cash on hand this ensures your construction will not be help up too. You will also need some fund before your loan is even approved to facilitate things like permits and other immediate requirements. In addition to your construction loan, it is the best move to have as much as forty percent of your total budget in cash. You may ask again, what will you use that for? Let me give you a short run-down list to help you:

1. You will need to place a down payment for the land or property before you even start to apply your loan. Keep in mind to factor in the closing expense cost for the land.

2. It does take some time to process and close your construction loan so for the meantime you will need to make your loan payable and still pay your taxes or other fees. You ought to have sufficient cash to cover these expenses for at least four months.

3. Also, before your loan gets approved, you will still need to deal in several service fees like your engineer, architects, design plans and other local area permits.

4. Add to that the monthly expenses during construction which includes property taxes, homeowners’ fees, monthly rental fees of the house you are living in while you new dream house is being built.

5. A bank lender usually approves and provides funds after a certain part of house construction is completed. You will need to shell out this money out of your own pocket up front and then later on reimburse.

6. The variety of choices available in the market, it is not surprising that you would want to create something bigger or better in the course of the building. You may want to add more as you build your house; you may opt for a better but much more expensive flooring, invest on appliances, cabinets that you prefer that those in the original plan. Without saying further, it is always good to be able to have the cash to do so.

7. When you are building a house the project will probably cost you more than you think. No matter how strict you are in your budget, you are likely be included in the ninety five percent of the other home builders that will go way over their budget. Again, you will want some cash on hand for that.

8. Contingency fund is a requirement just in case something may go unexpectedly. For instance, you may experience difficulty with your contractor or change that needs money to be resolved. Having cash will settle the issues immediately.

May this list help and convince you that for you to have an efficient and smooth home construction, you need sufficient cash available. Do not ever commit a mistake on simply relying on your loan. Be smart and save up before planning any home building.