Building A Home May Be Cheaper In 2024
That is a significant development. Rates started increasing in 2022, and many have hoped to enter a recovery going into 2024.
Lower Interest Rates In The New Year?
HousingWire.com published an article in December 2023 noting that while the Fed did not completely rule out rate hikes next year, rates increasing in 2024 ”seems unlikely" to happen.
Economic projections "from central bank officials" showed interest rates cut "to a median 4.6% by the end of 2024, suggesting three 25 basis points (bps) cuts" from where rates are currently at. And the cuts may well extend into 2025.
That means even lower potential rates in 2025, making it more attractive to build soon and refinance later.
Why The Fed's Actions Matter
When it costs lenders less to loan money, the lender may pass those savings to the borrower using a lower interest rate. The Fed's work does not directly touch mortgage rates, but the effects of that work do influence the interest rate offered by your local One-Time Close construction lender.
HousingWire notes, “Experts expect the path for monetary policy to support further declines in mortgage rates, just in time for a traditionally busy spring housing market," and that is great news if you are currently planning to build instead of buying existing construction.
Home Loan Challenges In 2024
Those who choose NOT to build, but buy an existing home instead may face higher competition for someone else's house.
If there are still low numbers of homes in a given market, the cost of those homes may rise accordingly. Building from the ground up eliminates this problem for the borrower.
And while it is possible that the inventory issue may not be as much of a factor in the end, it's difficult to predict whether or not there will be enough houses for sale in 2024. If you choose to build, you sidestep these problems.
Want More Information About One-Time Close Loans?
We have extensively researched the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs.
We have spoken directly to licensed lenders that originate these residential loan types in most states, and each company has supplied us with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders who know the product well and have consistently provided quality service.
If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
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We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allow for single-family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).
In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
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1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639), or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you is an eligible veteran, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.
Most VA lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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