Hi. I am very new to the construction industry and have been trying to
find an answer to this question: When a builder builds a spec home, is
he or she expected to be able to fully finance the home like a
traditional mortgage if he or she expects to sell it, or is it just
about having enough cash to pay expenses on the house and living
expenses until it sells?
For example, if Bob has 500k and sets 200k aside for expenses, could he
conceivably build a 1.2 million dollar house (300k down payment), even
though his income is not high enough to pay back the loan completely,
because he plans to sell it to someone who can? Let's assume 200k is
enough to pay expenses for a year or two after the house is built. Thank
you in advance for any information.
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Spec home financing confusion | Forum
Brittany Wang
Feb 1
If you have good credit and adequate collateral, you can borrow pretty much whatever you need.
Alyvia Lynn
Feb 1
When it comes to spec homes, it's not always about having enough cash to cover the entire cost like a traditional mortgage. Builders like Bob often use a mix of their own funds, loans, and future sale proceeds. Personally, when I urgently need cash, I usually check out personal loan lenders. If Bob's got 500k and sets aside 200k for expenses, he could potentially build that 1.2 million dollar house with a 300k down payment, counting on selling it to cover the rest. But there are risks involved. If the market doesn't cooperate, Bob could find himself in a tight spot. Always do thorough research and consult with experts in the field.
