Building Your Own Custom Home - Finance Issues

When building your own custom home, perhaps the biggest problem people have to face is getting finances for starting and finalizing the project. This implies purchasing the piece of land, paying the architect for the plan, purchasing the tools and construction materials you need, taking into consideration the design issues and so on.The best, but not the happiest way for someone to obtain finances for these types of projects is a loan. It's not music to your ears, but, still, it's the best possible way when you need lots and lots of money quickly. There are loaners who offer finance possibilities for building custom homes, but they have severe rules when helping you building your own custom home by offering you the money you need for this.The disadvantages for this are quite worth to be taken into consideration: they want the house to be completed in time and on budget. A very good solution for you in order to get rid of the extra cost issues that appear on the run is to go for a construction cost estimation solution. This way, you will know exactly how much money you need and what quantity of construction materials is required. Although this can be a bit costly, it's very efficient when building a home with a fixed sum of money - the one that the lender offers you.Should you have a bank account with some saved money, it's not very wise from you to spend it all on building up the house. You have to struggle to keep the price score down so as to finalize the project successfully. Remember that there are registered a few custom home construction disasters due to the lacking finances for project completion. So, analyze all the offers lenders have on the custom home construction loans and then take the wisest decision.

Home Financing Under Islamic Banking

The major reason for the current financial and economic crisis in America is said to be a rash of Bank failures. And Bad Home Loans are said to be the major reason for the Bank failures in the United States.Quite simply, American Banks had been over financing home buyers. Suppose a potential home buyer approached his Banker for a home loan, and his credit rating and financial standing would entitle him to a home loan of, say, USD 100,000.00, his Banker would gleefully advance him say USD150,000.00! Naturally this borrower would not be in a position to repay the stipulated installments because of his lower repayment capacity. This would eventually lead to a default on part of the borrower, rendering his loan account a non performing asset.In the light of the Banking crisis in the United States and also in Europe, it would be worthwhile and also interesting to have a look at the home loan financing scenario under the Islamic system of Banking.Typically, under the Islamic Banking system, home loan financing is based on the principle of Profit Mark Up on the cost of the property, by mutual consent of the Bank and the Borrower. This type of financing is usually done under the contract of Murabaha.It goes like this. Suppose you are interested in buying your dream home (who's not!). You approach the Islamic Bank with your requirements with regard to the financing. The Bank in turn would assess your requirements as well as evaluate your eligibility for the financing based on your income and repayment capacity. After taking an overall view of your financial standing and credit rating, the Bank would fix a eligible amount of home loan for you. Let us say the Bank fixes a home loan limit of USD100, 000.00 for you.This amount would include their mark up on the cost of the property. This mark up is fixed by mutual consent. Suppose the mark up is say USD 10,000.00. That means the net amount of your home loan is USD90, 000.00. The next step for you, the borrower, is to identify your dream home in the range of USD90, 000.00. After that you give details of the property thus identified to the Bank, who in turn will negotiate with the owner of the property and make a purchase of the same specifically to sell it to you.The next step would be to complete the formalities in regard to documentation etc., after which you get the possession of the home, though you are still not the owner of the same. The ownership will vest in you once you repay the stipulated number of installments within the repayment period fixed. Then your dream home becomes really yours!The main characteristics of the above type of home loan under Islamic Banking are: a proper evaluation and assessment is made of the repaying capacity of the borrower and fixation of the appropriate loan amount. Another notable feature, which is in fact the bedrock of Islamic Banking, is the absence of Interest on the loan amount. Instead the Bank adds up a profit margin to the cost of the asset and divides the total amount into equal installments payable usually monthly.The above example is a simple type of home loan under the Islamic Banking System. Within this system, variations are possible to suit the specific needs of the borrower.