Estimating Your Down Payment

The down payment is the upfront amount you'll pay out of pocket before obtaining financing for the remainder of the project cost. The size of your down payment can significantly impact the amount you need to borrow, your loan terms, and interest rates. Here's how to estimate your down payment for your custom home project, or you can get started with an EcoHome project.

• Determine the required down payment percentage: Construction loans typically require a larger down payment compared to traditional mortgage loans. Lenders often require a down payment of 20% to 30% of the total project cost. The exact percentage may vary depending on factors such as your credit score, loan type, and the lender's requirements. You can use our Affordability Calculator to get an idea.

• Calculate the total project cost: To estimate your down payment, you'll need to know the total project cost. This includes land acquisition, site preparation, construction costs, permits, and fees, as well as a contingency fund for unexpected expenses. Consult with your architect, builder, and other professionals to gather accurate estimates for each aspect of the project.

• Multiply the total project cost by the required down payment percentage: Once you know the total project cost and the required down payment percentage, multiply the two figures to determine the estimated down payment amount.
  For example, if the total project cost is $500,000 and the required down payment is 20%, your estimated down payment would be:
  $500,000 (total project cost) x 0.20 (down payment percentage) = $100,000 (estimated down payment)

• Assess your available funds: Review your cash reserves, available credit, and any other sources of funds you plan to use for the down payment. Make sure you have enough money to cover the estimated down payment without depleting your emergency fund or overextending your credit.

• Adjust your plans if necessary: If your estimated down payment is more than you can afford, consider adjusting your project plans to lower the total cost or explore alternative financing options that require a smaller down payment. Keep in mind that a larger down payment typically results in better loan terms and lower interest rates, so it's essential to strike a balance between affordability and minimizing your long-term financing costs.

By accurately estimating your down payment, you can make informed decisions about your custom home project's financing and budget, ensuring you have the funds needed to bring your dream home to life.