Buying and Financing an Unfinished Home

A HomeAdditionPlus.com visitor recently explained that she wanted to buy an unfinished home but could not get a conventional home mortgage because it was unfinished. As I indicated to her there are a couple of mortgage financing options to consider when wanting to buying an unfinished home.

The first choice is to visit a bank and inquire about obtaining a construction loan for financing an unfinished home. Many banks frown upon offering homeowners construction loans, however with a good building plan and cost estimates in place it is sometimes possible.

 

The chances are increased for obtaining a construction loan if the homeowner plans to make the unfinished home construction project a full time job (e.g. working as the General contractor.)

The second choice is to find a general contractor that will purchase the unfinished home on your behalf, via a home construction loan, and then sell you the home upon its completion. Of course a contract needs to be in place between the general contractor and the homeowner.

Construction loans can frequently be converted over into conventional loans (e.g. 30 year mortgage) so this should be considered when applying directly for the construction loan or going through a general contractor.