Think building a new home is out of the question in the current housing market? Think again.
The decision to buy or build a new home is a big one. There’s a lot to consider. At the same time, rising interest rates and speculation about a possible recession may be causing reservations about whether to make a major home purchase right now—or hold off. So we are addressing the most common concerns about investing in a new home in today’s market. We spoke with Tayt Ianni, a Senior Mortgage Loan Consultant with Kinecta Federal Credit Union* to address concerns about today’s market conditions, and get his perspective on why now might be a more cost-effective time to build or buy a home than many realize.
Concern #1: “The market is too volatile.”
Now is a great time to buy a new home or invest in rebuilding your home. Home values in the U.S. have historically increased over time, and real estate continues to offer homeowners a sound investment in the long run. When adjusted for inflation, home appreciation still exceeds those of the 1970s and even in the 2000s with the periodic dip during the recession.
It’s a common misconception that the current housing market is headed for an inevitable crash. But the likelihood of that is extremely low. The main reason prices rose so rapidly is due to the fact that there is not enough inventory to meet the demand. Remote work and record-low interest rates during the 2020 pandemic gave people more incentive to relocate and buy a home in places that wouldn’t have been an option before. With continued flexibility to work from home, many are still looking for a home with space to accommodate this new lifestyle.
Redfin Chief Economist Daryl Fairweather explains that this current housing market is fundamentally different from the housing bubble of the mid-2000s, which was driven by loose lending practices that allowed many homebuyers to take out mortgages they couldn’t afford. “That’s simply no longer the case. The housing market is still much stronger than it was before the Great Recession,” says Fairweather.
Concern #2: Rising interest rates
Taking out a home loan with the rise in interest rates may cause hesitation, but rates are still relatively low by historical standards and have started to stabilize. We also partner with preferred lenders who offer portfolio jumbo loans with significantly lower interest rates than conforming loans that have been hit hardest by rate increases. Unlike a GSE loan that must adhere to the standards put in place by Freddie Mac and Fannie Mae, the portfolio jumbo loans from our preferred lenders can offer buyers more flexibility and potentially better rates. “People are often surprised by what we can do for them and find our rates to be extremely competitive.” says Tayt Ianni, a Senior Mortgage Loan Consultant with Kinecta.
Our preferred lenders also work with clients to find the right mortgage and terms for their specific situation. So if you’ve been thinking about a new home, reach out and you may just realize that building your dream home is within reach.
Concern #3: “Financing a new home build is too complicated.”
Our end-to-end process simplifies your entire homebuilding experience—including the financing. We partner with trusted lenders that remove the complexities of construction lending and streamline the lending process for clients.
“Financing a custom home build with TJH is easier and more attainable than many realize,” says Tayt Ianni. “We offer an all-in-one loan with a one-time close. This avoids the stress and costly transaction fees typically associated with separate construction-to-permanent rollover loans. Instead, our process is the same as a traditional mortgage, just in advance of the house being built.”
Concern #4: “What if interest rates rise before my home is complete?”
A lot can happen to interest rates in a year, and without a lender that specializes in new homebuilding and one-time close loans, you may risk a higher rate by having a second loan closing for your mortgage once construction is final.
Because our preferred lenders use a one-time close, construction-to-permanent loan to lock in your rate, it eliminates unwelcome surprises and potentially thousands of dollars in additional closing costs. Similar to a fixed-rate mortgage, your interest rate will be determined and set before construction starts, and it will remain the same when the loan converts to a traditional mortgage.
Concern #5: “I don’t know how I will qualify for a second home.”
An existing mortgage on your current home doesn’t have to keep you from building your dream home. “One of the biggest concerns we see is that most people think they have to qualify for two homes and pay two mortgages [throughout the build process of a TJH pre-construction home],” says Tayt Ianni of Kinecta. “The reality is that they will have a much more affordable mortgage payment on the new home until it’s complete. At that time, they can sell the old home and apply that amount toward the new loan.” While it’s likely a bit more complex behind the scenes, Kinecta and our other preferred lenders make the lending process simple for clients:
- Payments are more affordable because they are interest only, based on the amount outstanding on the loan
- Funding occurs in disbursements to TJH—known as the draw process—as progress is made on the home
- The loan converts to a mortgage and principal payments begin after the final home inspection and/or certificate of occupancy
Concern #6: “Rebuilding my home requires more capital upfront.”
While the lending process to rebuild your home is similar to purchasing a TJH pre-construction home, there’s an advantage to rebuilding. You can receive lending based on the future appraised value of the home after it is built. The lender will then pay off your previous mortgage, and the new funding will go towards the build process. This eliminates having a second mortgage and could offer more flexibility and lower payments depending on the appraised value ratio to the existing mortgage principal.
Concern #7: “Rising costs of building supplies.”
With current inflation rates and the prices of building materials constantly changing, the last thing you want when building your new home is unexpected costs during the construction process. Unfortunately it’s more common than many realize, but it all comes down to the type of builder you choose. If you work with a cost plus builder, the price you agree upon could change depending on price increases of materials throughout the build process.
When you build a home with TJH, the base price of your home build is guaranteed and locked in when you sign your contract. Even if the cost of materials or lumber increases during construction, your budget stays the same. “We recommend Thomas James Homes to clients that want to build a new home,” says Tayt. “Their process is quick, they won’t go over budget, and they have greater buying power when sourcing materials.”
“I love that clients can design and build their dream home. One of my favorite things is when they realize that a new home is more cost-effective when they build with us. It just makes sense.”
— Brian Reid, Chief Sales Officer, Thomas James Homes
Reach out and you may just realize that building your dream home is within reach.
Let’s build together
Ready to build a new home and enjoy the peace of mind of our simple lending process? Browse our off-market listings of pre-construction homesites permitted for a TJH plan, or view our library of plans to see what’s possible for your existing homesite.
Chat with a TJH preferred lender
Want to learn more about your lending options and start the pre-approval process? Get all of your questions answered by a trusted lending partner.
Kinecta Federal Credit Union
Tayt Ianni, Sr. Mortgage Loan Consultant
*Kinecta Federal Credit Union and Thomas James Homes are not affiliated. Membership requirements apply. NMLS (Nationwide Mortgage Lending Service) ID: 407870. Subject to credit and property approval. Rates, program terms, and conditions are subject to change without notice. Not all products are available in all states and for all loan amounts. Other restrictions and limitations may apply. The actual terms of the loan will depend upon the specific characteristics of the loan transaction, the applicant’s credit history, and other financial circumstances that may apply.