General Information
Financing your Affordable Florida Home
By Tom Beaty
Apr 15, 2006, 07:49

At Affordable Florida Homes Inc, we understand that today’s Florida home buyer has a wealth of options when it comes to financing their newly constructed or pre-construction home.  But we also realize that having so many options can sometimes be confusing to the average home buyer, and especially to the first-time home buyer who has not been through the financing process before. 

We feel that it is important for our home buyers to understand these options so they can be sure they are making the correct financing choices for their individual needs.  Below, we have listed the most common financing options in an effort to assist our buyers in finding the home financing option that best meets their individual needs.        

The benefits of purchasing your Affordable Florida Home with cash

The first decision a new home buyer will face when it comes to financing is will they set up a cash escrow account or will they obtain a home loan?  This decision depends very much on the home buyer’s financial situation, including available cash flow.    

We understand that many of our home buyers are not in a position to pay for their new home entirely with cash, but for those buyers who are able to do so, the process is very simple and will ultimately save a substantial amount of money in interest payments.  The first thing to do when purchasing your new Florida home with cash is to establish an escrow account with a licensed Florida escrow company.  The cash payment for your new home is then placed in this escrow account.  Payments from this escrow account will be paid to AFHI when each phase of construction is completed. 

Your escrow company hires inspectors to verify that each phase of work on your new home is complete before we receive payment.  This ensures that payments are not made to AFHI until each phase of your home is completed.  When you set up a cash escrow account in this manner, the home site and home are deeded to you from the date the home site is purchased. 

Financing your Florida home through a lender

The most common funding method for new home construction is called a Construction Permanent Home Loan. This is the most cost efficient method of funding a new home other than using cash.

A Construction Permanent Home Loan is similar to a cash escrow account in that payments are made to AFHI after each phase of construction on your new Florida home.  This loan will automatically modify to become a permanent home loan when construction is completed.  

If you obtain a Construction Permanent Loan, you will pay the same closing costs you would with a traditional loan, but you only pay interest on your home site and each payment made to AFHI.  This way, you don’t have to pay interest on the full purchase price before you move into your completed home.   

With a Construction Permanent Loan, the home and home site are deeded in your name from the date the home site is purchased.  When construction on your new home is completed, and your Construction Permanent Loan is converted to the permanent home loan, you will begin making traditional interest payments on the total amount financed.

Obtaining a loan through a bank or mortgage broker

When choosing to obtain financing for your Affordable Florida home through a bank or mortgage broker, you should speak with a mortgage specialist who will carefully review all of the available financing options.  Different buyers have different needs, and no one loan type works for everyone.   

A mortgage specialist will look at your income level and the amount of time you plan to live in the home in order to choose a fixed rate, variable rate, or interest only loan.  Each of these loans has advantages and disadvantages, and you should carefully consider each option before choosing the type of loan that offers the most advantages for your individual situations.  

Financing through AFHI

The most expensive method of funding the construction a new home is a builder financed loan.  The reason for the additional cost is that AFHI must pay a closing cost on the credit line we have established for this purpose each time one of our buyers finances a home in this manner.  

At AFHI, we request a minimum deposit of 5% of the purchase price for all loans we finance, and with this low deposit amount, we also require that you use a lender of our choosing.  If you are able to provide a 10% deposit, you may use the lender of your choice.