5 Things to Know About Spec Homes and Home Financing

5 Things to Know About Spec Homes and Home Financing

When planning to buy a home, many prospective buyers wonder: what is a spec home financing? And how can I find the right mortgage for my situation?

Speculating on a home is a popular way to save money when you can’t afford to buy a home right away. It’s also called “flipping” or “flooding the market” because it’s a way to get more people interested in a property before putting in the time and effort to buy it. If you’re struggling to save for a down payment, or you’re looking to buy a home as an investment, a spec home might be right for you. Here are five things you need to know about spec homes and home financing.

What is a Spec Home?

A spec home is a home that is built with the intention of selling it. Generally, spec homes are built in a development and many people buy them before they are even finished to oversee the construction process. If you’re interested in buying or building a spec home, it’s important to know what you’re getting into.

Speculating on a home means investing in a property without owning it outright. That means that the property might not be yours until the sale goes through, but you can still live there while the sale is being finalized. As soon as the sale goes through and you sign off on all of the documents, you will officially own the property.

When you speculate on a home, you are assuming all of the risk for this decision because there is no loan or mortgage to back up your investment. You may also have trouble selling your spec home if real estate market fluctuations increase during this time period.

How Do You Find a Spec Home?

The best way to find a spec home is by using sites like Realty Shares, which let you search for homes available to be flooded with cash.

“In 2019, more than 60% of all home sales have been completed without an agent. In the last few years, many buyers and sellers have turned to sites like Realty Shares because they offer more transparency and lower fees than traditional agents.”

Who Can Buy a Spec Home?

A spec home is a future home that’s not yet built. If you want to buy a spec home, you need to have the money for a down payment and some additional funds for closing costs. You also need to have enough equity in your current home so you can get a mortgage on the new one.

If you don’t have the money or equity, you might consider buying a pre-owned home instead.

Read More: 5 Steps to Successfully Launch a Business from Home

What does a Mortgage for a Spec Home Look Like?

A mortgage for a spec home will look the same as any other mortgage.

Whether you’re looking to buy your first home, or you’re looking to invest in one as a flip, there are two main types of mortgages: fixed rate and adjustable rate. Fixed-rate mortgages are usually used when people plan to live in the home for at least five years. They involve an initial interest rate that never changes until the loan is paid off. Adjustable-rate mortgages (ARMs) start with an interest rate that goes up and down periodically based on a pre-determined index or market-based index. The interest rates may change based on the season, or when the economy changes.

Both types of mortgages have pros and cons, so it’s important to speak with a loan officer who can help you find the best type of mortgage for your situation.

Is Purchasing a Spec Home Right for You?

If you’re not trying to buy a home, but want to invest in one, a spec home is right for you. Speculating on a home is often cheaper than buying it outright because it’s less expensive than the traditional costs of purchasing a home. The initial mortgage is also lower and the down payment is usually around 10-20 percent. If you plan on renting out your property, get an estimate from a local real estate agent of how much you can expect to make from rent each month. This will help you determine how much your monthly mortgage payments should be.

You can also use your power of “flooding the market” as an investment strategy. By renting and flipping one property at a time, you can increase your return on investment and improve your chances of getting something quickly in today’s competitive market.

Should You Buy a Spec Home?

The question is not whether or to buy a spec Home Financing, but when. Typically, spec homes are cheaper because the seller will be willing to negotiate on the price and other terms of the sale. These homes are not unfurnished and have a lease-option agreement which means you can either buy the property now or at any time in the future. You will also likely get a better deal on your mortgage if that is how you choose to purchase it. If you’re looking for an investment property, this might be a good option since they are cheaper than regular homes.


If you are looking for a new home and want to build equity faster than renting, then buying a spec home is an option to consider. But before you jump in, make sure you are aware of the risks and what a mortgage for a spec home looks like.

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