Rising Rates Impact New Home Builds

Interest rates are rising but 1st Signature Lending is still financing consumers so they can build their dream home.  There are Inventory shortages all over the US and interest rates are rising.  Consumers that are shopping for new homes may consider building a home, but now hesitate due to interest rates rising.  Is that hesitation a valid concern?


Material costs were a major concern in 2021 and continue to be a challenge for builders across the country.   Construction projects were placed on hold with every type of home build due to the massive swings in costs.  Nonetheless, homes continue to be built in every state.   Rising rates or rate fluctuation has never been a huge variable in Construction to Permanent mortgage lending.


According to Freddie Mac – Housing supply is a historic challenge due to a lack of homes being built overall.  Since 1976, entry-level home construction has declined drastically year over year.  Many variables have impacted home construction from labor, materials, and land, but every year borrowers are faced with hard decisions about their long-term or initial home purchase plans.  When a consumer can find land, customize their home to meet their needs, and receive the financing to do so – the interest rate tends not to be the main priority in a construction project.   There are three main things to consider if you are interested in building a home in a rising rate environment.


  1. Fixed Rate Contract – It is imperative that your lender leverages a Fixed Rate Contract to ensure that you are locked into a rate and a home build cost. This will protect you against rising costs of material and interest rates while your home is being built.


  1. Find Land – In most cases, consumers that own their land can use it as a down payment to build their home. You will need to speak to your loan officer to understand how land may impact your mortgage loan.


  1. Find the Right Builder – Finding the right builder to build your dream home is extremely important. The right builder should be able to help you optimize your budget and help you make the right choices to stretch your dollars.  Builders should be properly vetted to ensure that they carry the proper insurance, have able construction workers for the job, and are a stable business.


In conclusion, borrowers that desire to build a home tend not to focus as heavily on interest rates as home purchasing customers.  It is extremely important to align yourself with the proper mortgage and builder professionals to protect your investment.  This investment is not only for you and your family, but overall, we are not building enough houses in America.  Choosing to build a home not only allows you to build equity but creates a building block for the American economy so our children will not face this inventory shortage in the future.


If you are interested in building a home and would like to learn more about the Construction to Permanent loan process, contact us today.

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